The following are the primary factors that determine loan eligibility:
1. In the case of a partnership or a director or owner of a borrowing entity, the entity’s credit rating will be reflected in the CIBIL or Equifax report or any other credit bureau. An acceptable credit score is a necessary but not sufficient criterion. In a borderline case, the bank may restrict the loan amount based on a subjective criterion.
2. Financial statements for the last two years of the borrowing entity. Several parameters determine the loan amount, such as turnover, partner salaries, depreciation, interest costs, and net profits after tax.
3. The debt service coverage ratio (DSCR) indicates the ability to service the EMI for the current loan. Banks generally request DSCRs between 1.0 and 1.5 depending on the situation.