A business loan is a loan specifically intended for business purposes. Business Loan is a great option when it comes to expanding your existing Business or starting something new of your own. It is the great way to increase financing towards various business need
Purpose of a Business Loan
- To expand the business
- To expand business location
- To start a whole new business
- To build credit for future requirements
- To purchase equipment for business
- To purchase more inventories
- To bring in fresh talents to the business
There are a few tips to get a business loan easily:
Confidence in the business and growth – Never use the money to pay off existing debts. It should always be used to expand the business with the borrowed money
Accurate application – The supporting documents and the details in the application must be the same and must be homologous
Accurate accounts – The bank statement must be updated and positive
Credit card history – A good credit card score or CIBIL score shows that your financial history is positive
More than one payment plan – Having a backup payment plan shows the lender that you are a responsible borrower
Loan Interest Rates:
The loan interest rates start 14.99% onwards which depends on the eligibility of the applicant depending on loan eligibility, income, your business and other criteria.
Advantages of Business Loan:
loan interest rates start 14.99% onwards which depends on the eligibility of the applicant depending on loan eligibility, income, your business and other criteria.
Collateral Free Loan:
Business Loans are unsecured loans which mean that no security or collateral is required to apply for a Loan. One does not need to provide any asset like a car or a house to avail a Business Loan. The banks take full responsibility of the loan whereas the business has nothing to worry about the asset or being in the default list of the bank. The financial lenders review the Loan Applicant’s credit history, age, location, income details of the past few years and only then the loans are offered.
Low Interest Rate:
Being into competition Banks/ NBFC’s provide loans on a lower rate of interest. Tenure, financial situation of the business, borrower’s credentials and the market situation are few of the factors that determine the interest rates. Generally Interest Rate of Loan starts from 14.99% onwards. Lenders charge a nominal fee as a processing fee that makes it easier to borrow the money.
Flexible Repayment tenure:
Lenders choose the term for the repayment. Borrowers get the flexibility from the lender to increase or lower the EMI depending on the profitability.
The loan amount that one can avail in loan can be up to Rs. 50 Lakh. It mostly depends on the financial credibility of the borrower before offering the business loan.
Multiple Loan option:
Borrowers can avail numerous types of loans according to the fund requirement. Banks/ NBFC’s offer various types of schemes to attract the borrowers. The real earnings for a bank come from the interest they charge on these loans. Options like term loans, standard business loans and others are available for the entrepreneur.
Minimal Paperwork and Fast Processing:
Since loans can be easily applied online, it requires minimal paperwork. Only the necessary documents are required to apply for a loan. Once the loan application is approved, the processing of the loan amount is followed by the
Eligibility Criteria for Business Loan:
If you need to apply for loan and want a bank to consider your loan application, then it is necessary for you to meet the eligibility criteria of the bank. If you meet all the necessary eligibility requirements of the bank loan for business, then you are more likely to get the loan approval. So before applying for a business loan, you must check the following eligibility criteria:
For availing a loan you must one of the following:
- Self-employed individual or
- Limited or private limited firm or
- Manufacturer or service provider.
- Your minimum turnover should be INR 50 lakhs.
- You should have a minimum experience of 3 years.
- You should have a total of 5 years of business experience.
- Your business should be making profit for at least 2 previous years from the day that you request a loan.
- Annual income should be around 1.5 lakhs per annum.
- You should have a minimum age of 21 years and maximum 65 years.
- You must submit the last 3 years of ITR statements. Your business partner can be a co-applicant in your application (which would increase the probability of getting a loan with acceptable tenure and interest rate.
Required Documents for Business Loan in India
Following documents are needed if you want to access the loan completely:
- The PAN Card that belongs to the company, the firm or the individual.
- ID proofs that can either be Aadhar Card, Passport, Voter’s ID or driving License.
- Bank Statements of the last 6 months.
- Latest ITR to consists of the computation of income, balance sheets, and P&L account of the last 2 years,
- Proof of Continuation that can either be ITR/Trade License/establishment/Sales Tax Certificate
- Sole Proprietorship Declaration or a notarized copy of the partnership deed.
- True copy of MOA and AOA.