Seasonality of Business Loans
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Questions and Answers

What is a key consideration for business seasonality?

  • The business should have very low business activity during peak season
  • The business should be involved in standalone perishable items
  • The business should have regular sales throughout the year (correct)
  • The business should have high sales during off-season

    • When should a loan proposal not be considered?

  • When there is no or very low business activity during off-season (correct)
  • When the business is involved in capital intensive activities
  • When the business has a high barrier to exit
  • When the business has high sales during off-season

    • Why should businesses involved in standalone perishable items be avoided?

  • Due to high sales during off-season
  • Due to high capital intensiveness
  • Due to low barrier to exit
  • Due to low shelf life, high wastage, and low capital intensive nature (correct)

    • What type of business is eligible for consideration?

    <p>Business with regular sales throughout the year</p> Signup and view all the answers

    What is used to verify the nature of business activity?

    <p>Documentary evidence</p> Signup and view all the answers

    How long is a credit bureau report valid for?

    <p>30 days</p> Signup and view all the answers

    What is the requirement for New To Credit (NTC) cases?

    <p>Business profile, cash flow, and financials of the customer</p> Signup and view all the answers

    What is the maximum number of DPD allowed in the last 12 months?

    <p>60 DPD</p> Signup and view all the answers

    What type of accounts are not acceptable?

    <p>NPA, Write-off, Settled Account, Doubtful, Sub-standard</p> Signup and view all the answers

    Who needs to approve any deviation from the credit check criteria?

    <p>Head – Credit</p> Signup and view all the answers

    Study Notes

    Seasonality of the Business

    • A permanent business with regular sales throughout the year is a key requirement; businesses with only seasonal sales are not eligible.
    • Seasonality is evaluated based on the regularity of primary activities throughout the year, which is verified through documentary evidence (if available).
    • Loan proposals will not be considered if there is little to no business activity during the off-season.
    • Businesses involved in standalone perishable items are to be avoided due to:
      • Low shelf life
      • High wastage
      • Low capital intensity
      • Low barrier to exit

    Credit Bureau Check

    • Report validity is 30 days, counting from the disbursement date

    Eligibility Criteria

    • No current delinquency allowed in any existing active loans
    • Any discrepancy in the bureau report must be justified with a No Objection Certificate (NOC) from the financial institution
    • New To Credit (NTC) cases are permitted based on the business profile, cash flow, and financials of the customer
    • No instances of more than 60 Days Past Due (DPD) in the last 12 months, meaning no continuously missed 2 EMIs in active loans for the past year

    Loan Conditions

    • No Repayment Obligation delinquency is allowed
    • The customer should not have any Non-Performing Asset (NPA), Written-off, Settled Account, Doubtful, or Sub-standard accounts

    Approval

    • Any deviations from the above criteria must be approved by the Head – Credit

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    Description

    Learn about the seasonality of business and its impact on loan eligibility. Understand the guidelines for business loan proposals and what to avoid.

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