The short answer
In order: they check your credit report, read twelve months of bank statements, reconcile your GST and ITR turnover against those statements, calculate what your cash flow can service after existing EMIs, and then decide an amount. The bank statement does most of the work.
Step one: the credit report
Before anything else, the lender pulls your credit report. Overdue balances, settlements, write-offs and a cluster of recent enquiries can end the assessment here, before anyone has looked at the business at all. This is why applying in several places at once is so self-defeating.
Step two: the bank statements
Twelve months, every business current account. The underwriter is building a picture:
- Total credits — the banking turnover.
- Whether credits are steady or lumpy.
- Average balance maintained.
- Cheque returns, inward and outward.
- Existing EMI debits, which reveal loans whether or not you mentioned them.
- Round-figure transfers that look like circulation rather than trade.
More business loan decisions are made on this document than on any other.
Step three: reconciliation
Declared turnover, GST turnover and banking credits are compared. Large gaps have to be explained; unexplained gaps mean the lowest number is used. Why the three numbers differ.
Step four: sizing
Two calculations run in parallel:
What turnover supports — a multiple of annual turnover, typically 10% to 25%, adjusted for vintage, GST status and constitution.
What cash flow can service — an assessed surplus, minus existing obligations, converted into a loan at a working rate and tenure.
The lower of the two is the offer. Which one binds is worth knowing, because the fix is completely different in each case.
Step five: the human part
Sector appetite changes month to month. A lender who was comfortable with your industry in March may not be in September, for reasons that have nothing to do with you. This is genuinely why a file declined at one lender can be sanctioned at another the same week — and why applying everywhere simultaneously, rather than sequentially and selectively, wastes the advantage.
What makes a file easy to say yes to
- Complete documents, first time.
- Bank statements that match the declared turnover.
- Existing loans disclosed upfront.
- A clear, specific answer to what the money is for.
- No enquiries in the last thirty days.
Free, and it does not ask for your phone number.
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