Harshil DoshiMost MSMEs need working capital at some point: to buy stock for a large order, to bridge slow customer payments or to get through a busy season. Many applications get stuck, not because the business is weak, but because it isn't presented properly. Here is what lenders look at.
1. Your financial statements
Lenders read the last two to three years of balance sheets and profit and loss statements. They look at turnover trend, profit, and how much the business already owes. Books that are late, incomplete or show very low profit make approval harder, even if the real business is healthy.
2. Your bank statement
The current account statement shows how money actually moves. Regular inflows, few cheque bounces and a healthy average balance all help. Cash-heavy businesses with little banking activity are harder to assess.
3. Credit score and repayment history
Both the business and the promoters' credit scores matter. Late EMIs or credit card dues on a personal account can affect the business application too.
4. Working capital cycle
For CC and OD limits, the bank estimates how much funding the business needs to run: stock, debtors and creditors. This is where a proper CMA report (credit monitoring arrangement data) makes a big difference. It shows the projected need in the format banks expect.
5. GST returns and compliance
GST returns help lenders verify turnover. Filing gaps or big differences between GST turnover and book turnover raise questions.
Getting loan-ready
- Books updated and financials finalised for recent years
- GST and income tax returns filed on time
- Credit reports checked and errors corrected
- Project report or CMA data prepared
- The right lender chosen for your size and industry
Approaching three suitable lenders with a well-prepared file usually works far better than approaching ten with an incomplete one.
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