calc / business loan / DSCR

Business Loan Eligibility

Lenders size a business loan two ways — a turnover rule of thumb, and DSCR: whether your cash profit covers the proposed EMI 1.25× over. This computes both and shows the binding one.

What your business supports turnover + DSCR

Eligible — DSCR method

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Eligible — turnover method

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15–20% of annual sales, working-capital style

Likely sanction

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the lower of the two governs

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§1The two methods

Turnover method: limit ≈ 15–20% of annual turnover (RBI's Nayak norm: 20% of projected turnover for WC) DSCR method: monthly surplus = cash profit ÷ 12 ÷ DSCR − existing EMIs loan = surplus, capitalised over the tenure at the quoted rate Cash profit = PAT + depreciation + interest on loans being refinanced

Banks compute both and sanction the lower. Turnover answers “how big is the business”; DSCR answers “can the cash flow actually pay us back with a margin”.

§2The gotchas

Only declared income counts

Everything is read off GST returns, audited financials and 12 months of banking. Sales that skip the books shrink your loan. Banking turnover that doesn't match GST turnover is a red flag that can kill the file.

DSCR below 1.25 ends the conversation

If profit ÷ obligations is under the bar, no turnover figure rescues it. The fixes: longer tenure (smaller EMI), refinancing costlier debt into the new loan, or a smaller ask.

Vintage and score are gates, not factors

Most lenders want 2–3 years of operations, a 650–700+ personal CIBIL for the promoter, and no recent cheque bounces. These are pass/fail before any formula runs.

CGTMSE can replace collateral

For eligible MSMEs, CGTMSE guarantee cover (now up to ₹10 crore) lets banks lend without collateral — at a 0.4–1.4% annual guarantee fee. Ask for it; branches don't always offer.

§3Related

Price the resulting loan on the term-loan EMI calculator, or a limit on the OD interest calculator.