Business Loan

There are over 20 banks and financial institutions in the country that offer tailor-made business loans at attractive interest rates to suit your financial requirements.

HDFC Bank

Benefits/Key Highlights:

• Self-employed individuals, private companies, proprietors, and partnership firms that are involved in trading, manufacturing, or services can apply for this loan, subject to meeting the lender’s eligibility criteria.
• Individuals looking to avail the loan need not submit any collateral or security. A guarantor is also not required to avail this loan.
• Loan balance transfer facility is offered.
• Prospective borrowers can check their eligibility online or at an HDFC Bank branch in just a few seconds.
• HDFC Bank guarantees quick disbursal of loans.
• Pre-payment of the loan is permitted after 6 EMIs are repaid.

*Note: For the EMI and repayment calculation, it is assumed that a loan amount of Rs.5 lakh has been availed for a 3-year term at an interest of 16% p.a.

Penalties/Internal Charges

• Overdue EMI interest: 2% per month on the overdue amount, subject to a minimum fee of Rs.200, will be applicable
• Stamp duties: As per the laws of the state that the borrower resides in
• Cheque swapping charges: Rs.500
• Amortisation schedule charges: Rs.200
• Cheque bounce charges: Rs.550 per instance
• Legal charges: At actual

Bajaj Finserv

Benefits/Key Highlights:>

• Self-employed professionals, self-employed non-professionals, and entities can avail this loan.
• The lender offers a flexi-loan facility, wherein the interest will only be charged on the actual loan amount that is withdrawn. This can help reduce your payable EMI.
• Applicants need not submit any security to avail this loan.
• Loans are approved within 24 hours.

*Note: For the EMI and repayment calculation, it is assumed that a loan amount of Rs.5 lakh has been availed for a 3-year term at an interest of 15% p.a.

Penalties/Internal Charges>

• Bounce charges: Rs.3,000 plus taxes
• Penal interest: 2% per month plus applicable taxes
• Document processing charges: Rs.1,449 plus applicable taxes
• Outstation collection charges: Rs.65 plus applicable taxes
• Part-payment charges: 2% plus applicable taxes

IIFL

Benefits/Key Highlights:>

• The lender offers flexible repayment options.
• Minimum documentation is required to apply for this loan.
• IIFL verifies your loan application and approves the application in a timely manner.
• Individuals looking to avail the SME Loan from IIFL do not have to submit any collateral to the lender.

*Note: For the EMI and repayment calculation, it is assumed that a loan amount of Rs.5 lakh has been availed for a 3-year term at an interest of 18% p.a.

Penalties/Internal Charges

• Late payment charges: 2% per month on the loan amount that is overdue.
• ECS/PDC/ACH dishonour charges: Rs.500 for each instance
• ECS/PDC/ACH swapping charges: Rs.500 for each instance
• Stamp duty: As per the laws of the state

Fullerton India

Benefits/Key Highlights:

• The lender offers four types of business loans: Business Loan, Business Loan for Women, Business Loan for Doctors, and Business Loan for Chartered Accountants. Each of these schemes has unique features and benefits.
• Fullerton India’s Business Loan can be availed by business owners for any business funding requirements that may have risen.
• The Business Loan for Women is a unique loan product that has specially been designed to cater to the financial needs of women entrepreneurs.
• The Business Loan for Doctors is a loan scheme that is designed for doctors who are in need of funds to either open their own clinic or upgrade an existing clinic. You can also apply for this loan if you are looking to purchase new medical equipment, hire more staff, etc.
• The lender’s Business Loan for Chartered Accountants is a loan scheme that can be availed by chartered accountants who require additional capital to expand their operations.
• Applicants need not hypothecate their assets to avail this loan.
• All loans will be disbursed in a timely manner.

*Note: For the EMI and repayment calculation, it is assumed that a loan amount of Rs.5 lakh has been availed for a 3-year term at an interest of 18% p.a.

Penalties/Internal Charges:

• Collection of cash or cheque: Rs.300 per collection
• ECS/cheque dishonour charges: Rs.30 per instance
• Swap charges: Rs.500
• Loan cancellation charges (if cancelled before payment of the first EMI): Rs.1000
• Fore-closure charges: Between 3% and 4%

DHFL

Benefits/Key Highlights:

• This loan is ideal for business owners and self-employed individuals who require a large loan amount.
• You can apply for this loan from DHFL if you wish to expand your business, upgrade your current business, or maximise growth.
• This loan can be availed by doctors, self-employed individuals, proprietorships, limited liability partnerships, partnerships, limited companies, and private limited companies.

Penalties/Internal Charges:

• CERSAI registry or modification charges: Rs.50/Rs.100 (based on the loan amount)
• Technical fees: Up to a maximum of Rs.750
• Part-payment charges: Up to 5% plus applicable taxes
• Fore-closure charges: Up to 5% plus applicable taxes
• ECS or cheque bounce charges: Rs.500 plus applicable taxes
• Bank charges on ECS or cheque bounce: At actuals
• Cash collection charges: 1% of the amount that is collected for payments that are of Rs.50,000 and above plus tax
• Overdue charges: 18% p.a.
• ECS or cheque swapping charges: Rs.250 per swap plus applicable tax
• Foreclosure statement charges: Rs.500 plus applicable GST

Magma Fincorp

Benefits/Key Highlights:

• The lender offers three types of SME loans – Collateral Free SME Loans, Express Business Loans, and Loans for Self Employed Doctors.
• As the name suggests, the Collateral Free SME Loan can be availed without submitting any collateral. Borrowers can avail up to Rs.2 crore as the loan amount, with a maximum loan term of 48 months.
• The Express Business Loan can be availed by micro SME enterprises if a requirement for funds arises. Borrowers can avail up to Rs.10 lakh and choose a loan term between 12 months and 36 months.
• The Loans for Self Employed Doctors is solely catered towards self-employed doctors who have set up a practice of their own and nursing homes/clinics/hospitals, subject to certain terms and conditions. Up to a maximum of Rs.30 lakh can be availed as loan. The loan repayment period ranges between 12 months and 60 months.
• The lender charges a competitive rate of interest.
• Customised and flexible loan repayment options are offered.

Kotak Mahindra Bank

Benefits/Key Highlights:

• The lender requires minimal documentation to process this loan.
• Flexible repayment options are offered to borrowers to suit their convenience and ease their financial burden.
• Door-step service is offered by Kotak Mahindra Bank.
• This loan can be availed by manufacturers, self-employed business persons, and service providers.

*Note: For the EMI and repayment calculation, it is assumed that a loan amount of Rs.5 lakh has been availed for a 3-year term at an interest of 14% p.a.

Penalties/Internal Charges:

• Documentation charges: Up to a maximum of Rs.10,000 plus taxes
• Cheque dishonour charges: Rs.750 plus taxes per instance
• Charges for copies of documents: Rs.500 plus taxes per instance
• Repayment mode/Account swap charges: Rs.500 plus taxes
• Charges to obtain a duplicate NOC: Rs.500 plus taxes
• Substitute interest: 3% per month plus taxes
• Terminal charges: 5% or 6% of the operating limit

Karnataka Bank

Benefits/Key Highlights:

• Karnataka Bank offers two types of business loans – MSME Loan and KBL Mahila Udyog.
• The MSME Loan from the lender can be availed by small, micro, and medium enterprises. The amount of loan that can be availed and the duration for which the loan can be availed will vary based on the purpose of the loan.
• The KBL Mahila Udyog is a business loan that is catered towards women entrepreneurs to help them meet credit requirements.
• The lender charges an affordable interest rate for this loan and offers quick approval.

*Note: For the EMI and repayment calculation, it is assumed that a loan amount of Rs.5 lakh has been availed for a 1-year term at an interest of 12% p.a.

Tata Capital

Benefits/Key Highlights:

• The lender offers business loans with flexible terms. Thus, these loans can be customised to meet the borrower’s exact requirements.
• The lender gives borrowers the option of customising their monthly EMI payments.
• No security needs to be provided to avail this loan.
• Individuals between 25 years and 65 years of age can avail this loan.

*Note: For the EMI and repayment calculation, it is assumed that a loan amount of Rs.5 lakh has been availed for a 2-year term at an interest of 19% p.a.

Penalties/Internal Charges:

• PDC charges: Rs.850
• Bounce charges: Rs.450
• Cancellation charges: 2% of the borrowed loan amount or Rs.5,750, based on whichever is the lower of the two
• Duplicate NOC: Rs.550
• Swapping charges: Rs.600
• Fore-closure charges: 5% of the outstanding loan amount plus GST

State Bank of India (Simplified Small Business Loan)

Benefits/Key Highlights:

• The Simplified Small Business Loan from State Bank of India is a general-purpose loan that can be availed by business owners, professionals, and self-employed individuals.
• The total charges levied, including processing fee, inspection charges, documentation charges, remittance charges, and commitment charges, is just Rs.7,500.
• Minimum collateral of 40% is required for this loan.
• In addition to this loan, State Bank of India offers 15 other business loans such as the SME eBiz Loan, Stand Up India, SME Smart Score, SME Credit Card, Doctor Plus, Medical Equipment Finance, e Dealer Finance Scheme, e Vendor Finance Scheme, ABL & ABL CRE, Fleet Finance, PM Mudra Yojana, Export Packing Credit, Lease Rental Discounting, Open Term Loan, and Warehouse Receipt Finance.

*Note: For the EMI and repayment calculation, it is assumed that a loan amount of Rs.5 lakh has been availed for a 2-year term at an interest of 12% p.a.

Mahindra Finance (Unsecured Business Loans for SME)

Benefits/Key Highlights:

• No collateral needs to be submitted when applying for this loan.
• The loan application process is quick and hassle-free.
• Funds can be availed for working capital needs and for business expansion.
• To apply for this loan, applicants need to be over the age of 21 years.
• In addition to the Unsecured Business Loans for SME, the lender also offers 7 other business loans such as Project Finance, Equipment Finance, Secured Business Loans, Corporate Loans, Working Capital Loans, Lease Rental Discounting, and Bill Discounting.

*Note: For the EMI and repayment calculation, it is assumed that a loan amount of Rs.5 lakh has been availed for a 1-year term at an interest of 18% p.a.

Penalties/Internal Charges:

• Part-payment charges: Nil
• Cash handling charge: Rs.100
• PDD delay charge: Rs.1,000 for the first months and Rs.100 per day thereafter
• Repayment swap charge: Rs.1,000
• Cheque bounce: Rs.500
• Late payment charge: 3% per month
• Litigation Charges: Rs.5,000 or the actual charge, based on whichever is higher

Federal Bank (Asset Power Scheme – Business Loans for Professionals)

Benefits/Key Highlights:

• Doctors, architects, and chartered accountants can apply for this loan.
• The loan amount can be repaid in easy monthly installments.
• Loans are approved quickly.
• The lender offers 7 other business loans. The other business loans that are offered by Federal Bank include the SME Parameterised Loan Scheme, Federal Goldsmiths Loan Scheme, General Credit Card Scheme, Commerical Vehicle Finance, Loan to Mobile/DTH/Other Electronic Recharge Vendors, SME Loan against Property, and Loan against Rent Receivables.

*Note: For the EMI and repayment calculation, it is assumed that a loan amount of Rs.5 lakh has been availed for a 3-year term at an interest of 14% p.a.

Standard Chartered Bank (Business Installment Loan)

Benefits/Key Highlights:

• No collateral is required to avail this loan.
• The loan can be availed if you require funds for your business expansion or working capital needs.
• The loan can be prepaid after 1 year of the loan term.
• The lender also offers 4 other business loans - Loan/Overdraft Against Property, Foreign Exchange Hedging, Loan Against Property, and Loan Against Property Saver.

*Note: For the EMI and repayment calculation, it is assumed that a loan amount of Rs.5 lakh has been availed for a 3-year term at an interest of 18% p.a.

Business Loan Eligibility

Business loans are designed to help small businesses and entrepreneurs meet their capital requirements. To avail a business loan from a lender, you will need to check if you meet the eligibility criteria listed by the lender. Listed below are the general eligibility criteria to avail business loans:

• The loan can be availed by self-employed professionals, self-employed non-professionals, and entities.
• Self-employed professionals usually include doctors, chartered accountants, company secretaries, architects, etc. This is subject to the applicants who have proof of qualifications and also are practicing their profession.
• Self-employed non-professionals include traders, manufacturers, etc.

• Entities include partnerships, limited liability partnerships, private limited companies, closely held limited companies, etc.

• The business may be required to have a minimum turnover of Rs.40 lakh
• Minimum of 3 years’ experience in the current business is required.
• Minimum 5 years of total business experience is required.
• The business should be making a profit for the last 2 years.
• Minimum Annual Income (ITR) of Rs.1.5 lakh per annum is required.
• Applicants should be between the ages of 25 years and 55 years.
• The IT returns for the last 1 year should have been filed.
• Lenders may offer business loans to only certain cities and towns.

Documents Required for Business Loan

In order to apply for a business loan, you will require the following documents-

• PAN Card for company, firm or individual
• Proof of ID, in the form of, copy of Aadhar Card, Passport copy, Voter’s ID copy, driving license.
• Proof of address, in the form of, copy of Aadhar Card, Passport copy, Voter’s ID copy, driving license.
• Bank statement (last 6 months)
• Latest ITR along with computation of income, balance sheet and P&L account for the last 2 years. All financials must be CA certified or audited.
• Proof of continuation (ITR/Trade License/Establishment/Sales Tax Certificate)
• Sole Proprietorship Declaration or certified copy of Partnership Deed
• Certified true copy of Memorandum and Articles of Association

How to Apply for a Business Loan?

Step1: You can apply for a business loan through online or offline channels. A number of lenders, today, give prospective customers the option of directly applying for a business loan through their official websites. To apply for a business loan online, you will need to visit the lender’s respective website, click on the loan product that you wish to apply for, and click on ‘Apply Now’.

Step2: Upon doing so, you will be redirected to another webpage, wherein you will be required to key in certain details into an online application form. You may be asked to enter your name, age, contact number, city of residence, details about your business, etc.

Step3: Once you key in the required information, you can click on ‘Submit’ to submit the online application form. A representative from the bank/financial institution will contact you to take the loan application process forward.

Step4: You can also choose to visit the nearest branch of a bank or financial institution and directly apply for a loan through the branch. In this case, you will need to submit the loan application form along with the required supporting documents at the branch.

Step5: Once the lender verifies your loan application and documents, your application will be approved, after which the loan amount will be disbursed into your account.

Reasons to Avail a Business Loan

There are multiple reasons for applying for a business loan. However, you should opt for this scheme only when:

• You have a strong business plan
• You foresee a decent cash flow in the future through the business
• The capital return of your business is greater than the interest of the loan borrowed

Below mentioned are the circumstances under which you can take a business loan in order to meet your financial requirement:

• While establishing a new business

If an entrepreneur has a business idea that he or she wants to turn into an endeavour with potential income, a business loan can be availed in such a scenario to meet his or her financial needs. However, in order to ensure your loan gets approved, you should make sure that your idea is good enough to generate substantial profits in order to repay the loan interest. You should also make sure that the overhead cost of the business is not high enough to cause a negative impact on the business and its profitability.

• For business expansion

Opting for a business loan is a great way to arrange for the funds required during the expansion of an organisation. Business expansion can include starting a new department, launch of a new product, upgrading an operation or product, venturing a new area or market, etc. Additionally, the chances of loan approval for an existing business are usually high owing to the fact that it holds a proven track record.

• To purchase machinery and equipment

When dealing with a high-demand product, it is essential for the business to maintain a regular supply to the market. In order to do this, the organisation might have to increase production by investing in equipment and machinery with the latest technology. Furthermore, a company might also need to buy equipment during an expansion. Business loans are a great way to meet credit needs during such a situation.

• To manage cash flow within the organisation

It is difficult for small companies to ensure there is a healthy amount of cash flow within the organisation. Therefore, a business might face a shortage of money to fulfil its liquidity requirements for a working capital such as utility bills, overhead salary, inventory management, rent, etc. However, this problem can be solved if a business owner opts for a loan to meet the company’s temporary financial crisis.

• Require working capital for business

When the cash flow is low within an organisation due to reasons such as market boom and increase in operating cycles, it is difficult to manage regular expenses such as salaries, supplies, and raw materials. In order to keep the business running and to recover from such a financial crisis, an entrepreneur might decide to avail a business loan and keep the business operational.

• To turn business losses into profits

A business loan can also be availed to receive the funds required in order to make a business that has been incurring losses profitable. Even though many lenders are sceptical when funding a less successful/unsuccessful business, corporate applicants with a practical plan that includes major changes in business operations or introduction of a new product might convince them to do so.

• To repay previous debts

It is always a smart move to repay multiple small debts using a large loan in order to avoid paying a huge amount of money as interest. A businessman can also choose to do the same by availing a business loan.

• While running a seasonal business

If you are operating a business that is in demand only during a certain time of the year then it might be difficult for you to manage the expenses when the orders start rushing in. In that case, you can secure a short-term business loan to offer undisrupted service to your customers and can repay the loan using the profit earned after the peak season is over.

Types of Business Loans

A few types of business loans are as follows:

• Overdraft facility

In an overdraft facility, the business owner can withdraw a larger sum than the amount present in the account as a loan to meet his or her business needs. The maximum amount that can be withdrawn and the interest rate under this facility is based on a mutual agreement between the lender and borrower.

• Term loans

In case of a term loan, a borrower can avail a secured or unsecured loan to receive the funds according to the situation and requirement of the business. These loans are helpful in acquiring long-term assets. There are three types of term loans based on tenure namely short-term loan, long-term loan, and intermediate loan that can be repaid on a monthly or quarterly basis. While the rate of interest for such loans can be fixed or floating, it varies according to the loan repayment tenure.

• Demand loans

When an entrepreneur withdraws a demand loan to meet the financial requirements of his or her business, the amount has to be repaid whenever the bank or non-banking financing company (NBFC) recalls it. Demand loans can be both secured and unsecured and are ideal to meet a short-term financial crisis. While the maximum term for this type of a business loan can be 12 months, the merchant can choose to renew it when the term has ended.

• Loan against securities

At the time of a financial crisis, a business can also decide to opt for a loan against its financial securities that are approved by the bank such as mutual funds, fixed maturity plans, insurance policies, savings bonds, demat shares, exchange-traded funds, etc.

• Letter of credit facility

This type of financing scheme can be availed by a business based on the creditworthiness of the buyer’s bank when the buyer and the seller do not know each other such as during international trade transactions. In this case, the bank pledges on-time payment to the seller after taking account of its origin certificate, insurance certificate, transportation documents, legal documents, and other commercial documents. However, if the buyer fails to make the payment, the bank is liable to pay the entire outstanding amount.

• Cash credit facility

The cash credit facility is an overdraft loan that can be availed by a business to finance its need for working capital by offering its current assets such as receivables, inventory, etc. as collateral. The maximum amount that can be withdrawn using this scheme is dependent on the stock margin fixed by the bank. The tenure of this loan can be renewed at regular intervals of 12 months.

• Bank guarantee

Whether you own a public/private limited company or proprietorship/partnership firm, you can avail this pre-approved secured loan by offering residential, commercial, or industrial property as collateral. This financing scheme helps companies secure down loans, buy the required equipment, or cover any additional costs that will help the organisation grow. In this kind of a business loan, the financing company promises to pay the stakeholders of the guaranteed business in case it defaults.

• Business loans for women entrepreneurs

In a bid to promote women empowerment, numerous banks and NBFCs offer special loan schemes to existing and potential women entrepreneurs. These exclusive schemes offer a lot of benefits and special discounts in terms of quantum of loan, interest rate, security, etc. Furthermore, female entrepreneurs can also benefit from the consulting, training, and counselling offered by several lenders to help them learn about various aspects of the market and industry. However, these loans are only available to women who hold more than 50% shares of a company.

Features and Benefits of Business Loans

Before you choose to apply for a business loan to start a new business or expand the current one, you should learn about the features of a business loan.

Step1: The corpus for a business loan depends on numerous factors such as the amount of profit it makes annually, valuation of the business, and operating industry of the business in addition to the number of years it has been operational.

Step2: These loan applications usually get approved fairly quickly and sans any hassle during processing. Most banks and financial institutions provide their customers with the promise of secured lending solutions when it comes to business loans.

Step3: Since business loans carry flexible repayment options along with minimal documentation, they have become one of the most preferred ways for entrepreneurs to meet the financial needs of their businesses.

Step4: Unsecured business loans enable businesses to fund their exact exigencies and repay their loan amount in easy EMIs (equated monthly instalments). These loans can be availed for a variety of reasons, including but not limited to, business expansions, working capital, etc.

Step5: Banks and financial institutions offering business loans also provide their customers with the flexibility of doorstep service. Additionally, a number of business loan lenders in India usually don’t expect any collateral, guarantor or security from the applicant.

Step6 :Some banks offer customers with the facility of business loan eligibility in 1 minute, either online or in any of their branches. These speedy approvals ensure that customers don’t waste any of their time waiting to hear from banks about the status of their loan application.

Step7 : Business loans come with the added benefit of services such as SMS, Web Chat, Phone Banking, etc. Some banks even extend exclusive higher loan amounts to their self-employed customer base.

Thus, if you are in need of funds for business needs, make sure to compare your options and apply for a business loan at the earliest.

Things to Consider When Applying for a Business Loan

Listed below are a few points that you should consider before availing a business loan:

• Work out how much your business needs: The quantum of loan offered by lenders to business owners/self-employed individuals is usually quite high. That said, it is necessary to assess your funding requirements and avail a loan that will help you fund your business requirements. It is best to not borrow more than what you require since the repayment may become a hassle.
• Research the types of business loans: Many lenders offer more than one business loan as part of their product mix. These loans are likely to have varied terms, loan amounts, loan tenures, and repayment options. Further, select business loans may be specially catered towards certain sectors or segments of the society, thus helping individuals belonging to these groups avail either a lower interest or better terms. Hence make sure to do your due research about the various types of business loans that are available in the Indian market and make a choice accordingly.
• Check your credit score: Your credit score indicates your creditworthiness. Individuals with a good credit score are considered less likely to default on their repayment. Lenders, thus, usually check your credit score before approving it. To increase your chances of being approved for the loan at an affordable interest rate, it is advisable to have a credit score above 750. Before applying for a business loan, make sure to check your credit score and take the necessary steps to improve your credit score, if necessary.
• Understand the repayment terms: For business loans, the borrowed amount is, in most cases, repaid via Equated Monthly Installments (EMIs). Lenders usually take your repayment capacity into account and decide on a loan tenure and monthly EMI that is affordable. As an applicant, you should ensure that you understand your lender’s repayment terms. Make sure to not default on EMI payments since it can cause your credit score to dip.
• Check the charges: Certain charges that are levied on business loans include the interest rate, processing fee, preclosure fee, documentation charges, part-payment fee, default fee, etc. Make sure to check the charges that are levied by different lenders and understand how they affect the cost of your loan.

The above-mentioned points are a few things that you should take into consideration when applying for a business loan. Also, it is in your best interest to compare at least a few business loans that are offered by different lenders and opt for one that suits your requirements.

How to Use a Business Loan EMI Calculator

EMI calculators are the quickest and easiest way to calculate your EMI accurately. You are required to provide the calculator with some standard information. This may include, the loan amount that you require, the interest rate that will be charged to your loan, the duration you expect to take the loan for, etc.

Once you feed the above information into the calculator, the calculator will give you an estimate of how much you will be expected to pay each month as repayment instalments towards your business loan.

Business Loan FAQs

1. What security should I provide to avail a business loan?

No security or collateral is required in order to avail a business loan, in most cases, though a thorough evaluation of your documents would be needed to confirm that. If you are required to submit security or collateral, you can check the lender’s terms and conditions to know what is generally accepted.

2. I am a doctor and have been practising for 10 years now. Can I get a business loan to set up my independent practise?

Yes, business loans are offered to all practising professionals, subject to proof of qualification being documented.

3. Will I be required to share my personal information to use the EMI calculator to calculate EMIs on my business loan?

No, you will not be asked for any personal information while calculating your expected EMI. The EMI calculator only requires the loan amount that you intend to apply for, the tenure of the loan, and the rate of interest.

4. For what purposes can I avail a business loan?

You can apply for a business loan for any of the following or related purposes-

• Small business finance
• Working Capital finance
• Home renovation
• Business expansion finance

5. How long will it take for me to find out if I am eligible for a business loan?

Business loans usually are offered speedy approvals and most banks offer applicants with the convenience of business loan eligibility in 1 minute. This facility can be availed online or any of the bank’s branches.

 

A GST rate of 18% will be applicable on banking services and products from 01 July, 2017.