What Banks Look for Before Giving a Business Loan

Short answer: Before giving a business loan, banks in Bangladesh check six things: your credit history (a clean CIB report from Bangladesh Bank’s Credit Information Bureau), your cash flow (whether the business earns enough to pay the instalments with room to spare), your own stake in the business, collateral or guarantees, the purpose of the loan and the health of your sector, and your paperwork: trade licence, e-TIN, proof of tax return for loans above Tk 5 lakh, bank statements and, for companies, audited accounts that banks verify online with the accountants’ institute (ICAB). Banks also give each borrower an internal credit risk rating. Clean accounts, regular bank transactions and a realistic loan request matter more than connections.

Rejected, then approved

Shirin, 38, runs a boutique and tailoring shop in Chattogram with six staff. Her first loan application for Tk 30 lakh was turned down. Her sales were mostly in cash, her bank account showed little activity, and she had no tax return. “The officer said my shop looked busy but my papers looked empty,” she says.

What do banks check before a business loan?

What banks check	What they want to see	Red flags
Credit history (CIB)	No defaults; past loans repaid on time	Overdue or classified loans, including as a guarantor
Cash flow	Steady income that comfortably covers all repayments	Irregular deposits, mostly cash sales, falling turnover
Your own stake	Owner’s money invested in the business	Asking the bank to fund almost everything
Collateral or guarantee	Property, deposits or a strong guarantor	Disputed land titles, overvalued assets
Purpose and sector	A clear, productive use of the money	Vague purpose, risky or shrinking sector
Paperwork	Valid licences, tax documents, accounts	Expired trade licence, unverified or fake accounts

1. Is your credit history clean?

The first check is usually your CIB report, which shows every loan, card and guarantee you and your business hold with banks and finance companies, and whether they are being repaid. A loan classified as substandard, doubtful or bad, or a guarantee for someone else’s defaulted loan, can stop an application at once. Read what CIB is and how it affects your loan before you apply, and fix any errors first.

Banks also rate each borrower using Bangladesh Bank’s Internal Credit Risk Rating System (ICRRS), which scores financial strength, repayment record and management. In August 2025, Bangladesh Bank allowed banks to lend even to borrowers with an “unacceptable” internal rating, but only with extra due diligence on cash flow and collateral, closer monitoring and quarterly reporting to the central bank, The Financial Express reported.

2. Can your business afford the repayments?

This is the heart of the decision. Banks look at your sales, expenses and existing loan repayments to judge whether the business can pay the new instalment with room to spare. One common measure is the debt service coverage ratio (DSCR): the cash your business generates divided by all your loan repayments. As a rule of thumb, lenders want this comfortably above 1.

By our calculation, for a business with Tk 1.5 lakh of monthly cash flow and an existing EMI of Tk 20,000, a new three-year loan at 13% looks like this:

Loan amount	New monthly EMI	Total EMIs	Coverage (DSCR)
Tk 15 lakh	About Tk 50,500	About Tk 70,500	About 2.1: comfortable
Tk 30 lakh	About Tk 1.01 lakh	About Tk 1.21 lakh	About 1.2: tight

Asking for the right amount can turn a rejection into an approval. Bank statements matter because they are how the bank sees your cash flow; a business that deposits its sales regularly is far easier to lend to than one that runs on cash. Accepting payments by Bangla QR or through a payment gateway also builds a digital record of sales.

3. How much of your own money is in the business?

Banks prefer owners who share the risk. If you have put your own savings into stock, equipment or premises, and the business already has some net worth, the bank feels safer. A business that already owes a lot compared with what its owners have put in (a high debt-to-equity ratio) looks risky.

4. What security can you offer?

For larger loans, banks usually want collateral: land or a flat with clean title, fixed deposits, or a lien on machinery, stock or receivables, plus personal guarantees from the owners. The bank will value the property, check ownership documents and register a mortgage. Some schemes for small and new businesses offer loans without collateral. Bangladesh Bank’s New Entrepreneur Refinance Scheme, for example, offers up to Tk 10 lakh without collateral, as we explain in how to get funding for your first startup.

5. What is the loan for?

Banks lend more readily for clear, productive purposes: buying stock before a busy season, a machine that raises output, or expanding a profitable outlet. They are wary of vague requests, loans to repay other loans, or businesses in sectors facing a downturn. A short business plan showing how the money will raise sales, and how quickly, makes the officer’s job easier.

6. Are your papers in order?

• Trade licence, up to date.
• e-TIN and proof of tax return. Proof of return submission is needed for loans above Tk 5 lakh, a requirement introduced through the 2022 budget, The Financial Express reported.
• Bank statements, usually for the last 6 to 12 months.
• Audited financial statements for companies. Bangladesh Bank requires banks to check them through ICAB’s online Document Verification System, to catch fake or altered accounts, The Business Standard reported.
• Company papers: memorandum and articles, certificate of incorporation, board resolution to borrow, or a partnership deed.
• VAT registration, where it applies.
• Property documents for any collateral, and the NIDs and photos of owners and guarantors.

For a fuller list by loan type, see what it really takes to get an SME loan in Bangladesh.

Why are banks more careful now?

Bad loans have reached record levels. Defaulted loans stood at Tk 6,06,555 crore, or 32.78% of all loans, at the end of June 2026, Dhaka Tribune reported. With so much money stuck in unpaid loans, banks have tightened checks, and honest small businesses often feel the squeeze. A well-prepared application stands out.

How to improve your chances

1. Run all sales and expenses through one business bank account for at least six months to a year.
2. File tax returns every year and keep your trade licence current.
3. Check your CIB report and settle any overdue card or loan.
4. Keep simple monthly accounts; for a company, get a proper audit.
5. Ask for an amount your cash flow can clearly support.
6. Start with your own bank, which already sees your transactions.
7. Prepare a one-page plan: why you need the money and how you will repay it.

Back to Shirin

Shirin spent a year depositing all her sales, started taking payments by QR, and filed her first tax return. She applied again, this time for Tk 15 lakh to buy stock before Eid. “Same shop, same me,” she says. “But this time the bank could see the business on paper. It was approved in three weeks.”

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This article is general information, not financial advice. Each bank sets its own credit policy; ask your bank for its current requirements.

Frequently asked questions

Why do banks reject business loan applications?

Common reasons are a poor CIB record, weak or unproven cash flow, missing tax or licence documents, too large a loan request, or collateral with unclear title.

Do I need a tax return to get a business loan?

For loans above Tk 5 lakh, proof of tax return submission is required. An e-TIN alone is not enough.

Can I get a business loan without collateral?

Yes, for smaller amounts under some schemes, such as Bangladesh Bank’s new entrepreneur scheme for loans up to Tk 10 lakh. Larger loans usually need security.

How do banks check if my accounts are genuine?

For companies, banks verify audited statements through ICAB’s Document Verification System. For all borrowers, they compare your accounts with your bank statements and tax returns.

How long does a business loan take?

It varies by bank and loan size, from a couple of weeks for small, well-documented loans to longer for secured loans that need property checks.

Key words explained

Term	What it means
CIB	Bangladesh Bank’s Credit Information Bureau, which records borrowers’ loans and repayments.
ICRRS	Internal Credit Risk Rating System: how banks score a borrower’s risk.
DSCR	Debt service coverage ratio: cash flow divided by loan repayments.
Debt-to-equity	How much a business owes compared with what its owners have put in.
Collateral	An asset pledged to the bank as security for a loan.
DVS	ICAB’s Document Verification System for checking audited accounts.
PSR	Proof of submission of return: evidence that you filed your tax return.

How we reported this

We used The Financial Express’s reports on Bangladesh Bank’s August 2025 credit rating directive and the tax return requirement for loans, The Business Standard’s report on ICAB document verification, Dhaka Tribune’s report on defaulted loans, and our own earlier coverage of CIB, SME loans and startup funding. The loan and DSCR examples are our own calculations. The featured image is an illustration made by Dhaka Debates.

Editor’s note: Shirin is illustrative, created to show how a small business owner might go through a loan application. She is not a real person. The rules and figures come from the published sources listed with this article and our own calculations.