Business Loan

Business loans are designed to help small businesses and entrepreneurs meet their capital requirements. There are over 20 financial institutions in the country offering tailored business loans at attractive interest rate to suit your financial needs.

What is a Business Loan?

A business loan is a type of loan which you can avail yourself, if you wish to raise capital to start a business of your own. There are various banks in India which offers business loans to their customers at attractive interest rates and flexible repayment tenure.

Why is a Business Loan important?

It requires a significant amount of capital to start a business of your own and in such situations, applying for a business loan is a good idea. A business loan will allow you to purchase the necessary equipment, workforce, and funds for expansion purposes.

Thus, there are banks in India which offers business loan at flexible interest rates. You must conduct your own research to avail yourself of the most suitable business loan.

Types of Business Loan

There are various types of business loans that you can apply for. They are given below:

1. Term Loans

Term loan is a type of business loan which you can use for short to long term. You can use the loan amount to expand your business, purchase assets, and others. The interest charged will depend on the loan amount and tenure chosen by you.

Term Loan Eligibility Criteria

The eligibility criteria to apply for a Business Term Loan are given below:

• You must be a resident of India
• You must be aged between 24 years and 70 years.
• You must have a decent credit score.

Term Loan Application Process

Online Application Process

• Visit the official website of the lender from whom you wish to apply for a business loan.
• Click on the ‘Apply Now’ button. In the next step, provide details such as your name, date of birth, email ID, mobile number, etc.
• Fill in the application form and submit it along with all the necessary documents. The bank will verify all the details and if everything is correct then the amount will be disbursed to your bank account.

Offline Application Process

You can also visit the nearest bank’s branch and submit the application form and documents to apply for a business term loan. Make sure you have all the relevant documents, and you meet all the eligibility criteria.

Repayment TenureThe repayment tenure offered under such business schemes ranges between 4 years and 5 years.

2. Working Capital Loan

A working capital loan is used to finance a company's ongoing operations, such as paying the paychecks of their employees, taking care of accounts payable, etc. Not many businesses experience consistent year-round sales or revenue, and occasionally funding is required to maintain operations. This is typically the case for businesses with seasonal business cycles, but some other businesses might need a loan like this during holiday seasons or times of slow business activity.

Depending on the amount availed and the financial health of the firm, you can apply for this type of loan. This type of loan can either be secured or unsecure, which is you may either have to provide a collateral or not provide one to the bank.

Working Capital Loan Eligibility Criteria

The eligibility criteria required to apply for a Working Capital Loan are given below:

• You must be an Indian resident.
• You must be aged between 21 years and 70 years.
• There should be no loan default from your end.
• You must maintain a decent credit score.

Application Process of a Working Capital

You can apply for a working capital loan either online or offline. For online application process, you can visit the lender’s website and submit the application form and relevant documents after which it will be verified. If all the details are correct, then the loan amount will be disbursed to your bank account.

For the offline process, simply visit the nearest branch of the bank and submit the application form and the documents. If all the documents are correct, the loan amount will be disbursed to your bank account within 3-5 business days.

Repayment Tenure

The repayment tenure offered may range between 6 months and 4 years.

3. Small Business Administration (SBA) Loans

Small businesses who may not require a high capital but still need funding for expansion or operational purposes may avail SBA loans. You can avail loan amount between Rs.10 lakh and Rs.25 lakh. These types of loans might require you to provide security such as your mortgaged land, depending on which you will be able to avail yourself of a loan amount.

Eligibility Criteria

The eligibility criteria to avail this type of business loan are given below:

• You must have an existing business for at least 3 years.
• You must be a resident of India aged between 24 years and 70 years.
• You must not be a defaulter on previous loans.

Application Process

Most banks allow you to apply for SBA loans either online or offline. For online process, simply visit the official website of the bank and apply by submitting the application form and the necessary documents. If all the details are in order and you meet the eligibility criteria, the loan amount will be disbursed to your bank account.

For offline process, simply visit the nearest branch of the bank and submit all the necessary documents including the application form. The loan amount will be disbursed to your bank account if all the details provided by you are correct.

Repayment Tenure

Repayment tenure may range between 1 year and 5 years.

4. Line of Credit

A line of credit is a versatile loan product that enables you to borrow money against an open line of credit. You can draw money from your credit line whenever you need it, and you only have to pay interest on the money you actually borrow.

Generally, you might be able to avail a line of credit of up to Rs.25 lakh where you pay interest only on the amount availed by you. The interest rate charged ranges up to 1.5% per month.

Eligibility Criteria

If you own a business with a turnover of Rs.20 lakh and above and operational for a minimum of one year can apply for this type of business loan.

Application Process

Applying for such loans online is simple and straightforward. Simply provide the necessary details including the application form and documents and if they are in order, a line of credit will be activated. Withdraw only the amount you need and pay the interest on the amount used.

Repayment Tenure

The repayment tenure offered ranges between 1 month and 1 year.

Business Loan Eligibility

To avail yourself of 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:

1. The loan can be availed by self-employed professionals, self-employed non-professionals, & entities.
2. 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.
3. Self-employed non-professionals include traders, manufacturers, etc.
4. Entities include partnerships, limited liability partnerships, private limited companies, closely held limited companies, etc.
5. The business may be required to have a minimum turnover of Rs.40 lakh
6. Minimum of 3 years’ experience in the current business is required.
7. Minimum 5 years of total business experience is required.
8. The business should be making a profit for the last 2 years.
9. Minimum Annual Income (ITR) of Rs.1.5 lakh per annum is required.
10. Applicants should be between the ages of 25 years and 55 years.
11. The IT returns for the last 1 year should have been filed.
12. Lenders may offer business loans to only certain cities and towns.

Documents required to apply 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.

Comparison of Business Loan in India by banks

Preparing the loan application for Business Loan

One can take a few steps before asking for a business loan to increase the likelihood that the loan will be approved and that it will do so with fair terms and conditions.

For instance, paying off the bulk of the outstanding debt is a smart idea to enhance borrowing capacity.

It is wise to do some research before requesting a business loan. This makes it easier to understand the requirements for eligibility and to identify the loan type that most closely matches one's needs.

Some of the things that you must keep in mind when submitting your application form are given below:

• Compare the business loans offered by various lenders. This will help you determine the best loan suitable for you.
• Ensure you have a high credit score. A low credit score will make it difficult for you to apply for a business loan.
• Ensure all the details mentioned on the documents are correct. The bank will check each details and documents and any discrepancy may result in rejection of application.
• Prepare a business plan. The bank would like to know which type of business they are providing loan for and whether you will be able to repay it on time.
• Check the EMI amount payable and based on it make the decision whether you must apply for the business loan scheme or not.

Business Loan New Announcements

Finance Minister Nirmala Sitharaman on Wednesday announced a Rs 9,000-crore corpus for a redesigned credit guarantee plan in an effort to reduce stress for small enterprises. The updated credit guarantee plan will go into force on 1 April 2023, according to Sitharaman.

HDFC Bank Business Loan

Apply for a business loan in just 60 seconds* and get approved. HDFC Bank offers loans for small businesses with an overdraft facility and Apply now on bank website.

Benefits and 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.
• 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 10% p.a.

Penalties and 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

IIFL Business Loan

IIFL Finance offers fast business loans that are suitable for MSMEs with small financial needs. You can complete the entire application process from start to finish online, so there is no need to visit a bank branch.

Benefits and 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 12.75% p.a.

Penalties and 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 Business Loan

Fullerton India business loan offers low interest rates from 17% to suit every business needs. Before apply Check your business loan requirements & eligibility criteria.

Benefits and 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 14% p.a.

Penalties and Internal Charges

• Collection of cash or cheque: Nil
• ECS/cheque dishonour charges: Rs.300 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 7%

Piramal Capital and Housing Finance Limited (PCHFL)

Benefits and 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 PCHFL 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.

*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 12.50% p.a.

Penalties and Internal Charges

• CERSAI registry or modification charges: Rs.50/Rs.100 (based on the loan amount)
• Duplication charges: Rs.500
• Statement of Account charges: Rs.500
• Collection pickup charges: Rs.250
• Loan pre-closure statement charges: Rs.1,000
• Loan repayment schedule charges: Rs.500

Magma Fincorp (Poonawalla Fincorp) SME Business Loan

Magma FinCorp offers loans for small businesses in India up to Rs 10 lakhs without any collateral and minimal documentation.

Benefits and 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 Business Loan

Kotak Business Loans offer loans up to Rs. 75 lakhs, minimal paperwork and speedy approvals. They also provide services at your doorstep.

Benefits and 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 and Internal Charges

• Documentation charges: Up to a maximum of Rs.7,000 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 Business Loan

Benefits and 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 Business Loan

Apply for tata Capital Business Loan with quick approvals and flexible repayment options.

Benefits and 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 12% p.a.

Penalties and Internal Charges

• PDC charges: Rs.850
• Bounce charges: Rs.2,000 per Cheque/ Payment Instrument Dishonour plus tax
• 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.550 plus tax
• Fore-closure charges: 4.5% of the outstanding loan amount plus GST

SBI Simplified Small Business Loan

Apply online for SBI Simplified Small Business Loan which offers business loans to large as well as small and medium sized businesses.

Benefits and 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

Apply Mahindra Finance business loan and get Quick loan disbursal with no hassle at attractive interest rate offers.

Benefits and 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 and 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)

Federal Bank provides business loans with different schemes like Federal Goldsmith Loan Scheme, Loan against Rent Receivables or Property and many more.

Benefits and 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 11.40% p.a.

Standard Chartered Bank (Business Installment Loan)

Apply for Standard Chartered Business Loan and Grow your business quickly with our Simple and Hassle-free Process.

Benefits and 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 17.25% p.a.

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 Take 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.

Government Loan Schemes for Businesses

There are certain government backed business loan schemes which you can avail for yourself. We have listed down below some of the government sponsored business loan schemes that you can apply for provided you meet the necessary eligibility criteria:

• SIDBI Loans: Small Industries Development Bank of India (SIDBI) loans was set up in 1990 to help in the growth of MSME sector in India. You can approach Small Finance Banks (SFBs) and Non-Financial Banking Corporations (NFBCs) and apply for loan amounts ranging between Rs.10 lakh and Rs.25 crore with tenure of up to Rs.10 crore. You won’t need to provide any collateral for loan amount of up to Rs.1 crore.
• Credit-Linked Capital Subsidy Scheme: This loan can be availed if you wish to upgrade the technology for your business. Here, you will be able to get an up-front capital subsidy of 15% provided you have an operational business.
• Credit Guarantee Fund Scheme: MSME based businesses can avail this scheme without providing any collateral. Any regional rural bank, and scheduled commercial bank can become a part of this scheme. Under this scheme, the agency will provide loan scheme to eligible MSME based business with loan amount ranging between Rs.10 lakh and Rs.1 crore.
• MSME Loan Scheme: This is a government-based business loan scheme which can be availed by any business with loan amount of up to Rs.1 crore. The processing of loan will take roughly between 8 days and 12 days.
• National Small Industries Corporation Subsidy: Under this scheme, two types of funding options are available – Marketing Assistance, and Raw Material Assistance. Any micro or small business enterprise with an EM Part-II (Optional)/ Udyog Aadhaar Memorandum (UAM) will be eligible to apply for this business scheme.
• Mudra Loans: There are three schemes offered under Mudra Loan. They are:
• Shishu Loan: Loan amount of up to Rs.50,000
• Kishore Loan: Loan amount of up to Rs.5 lakh
• Tarun Loan: Loan amount of up to Rs.10 lakh

Features 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.

• 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.
• 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.
• 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.
• 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.
• 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.
• 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.
• 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.

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

FAQs on Business Loan

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. 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.

5. How much liquidity will be injected by the Reserve Bank of India (RBI) under the AtmarnirbharBharat Abhiyan?

   RBI will inject a total of Rs.3.74 lakh crore of which Targeted Long-Term Repo Operations (TLTRO) will be worth Rs.1 lakh crore. Cash Reserve Ratio (CRR) cut of 100 basis points to 3% of net demand and time liabilities worth Rs.1.37 lakh crore, and accommodation under Marginal Standing Facility hiked from 2% of Statutory Liquidity Ration to 3% worth Rs.1.37 lakh crore.

   RBI will also inject liquidity which will be 0.5% of the GDP out of which Rs.50,000 crore will be reserved for the second phase of TLTRO, and additional refinancing of Rs.50,000 crore by NABARD, SIDBI, and SHB.

6. The turnover of my business is below Rs.50 crore. Am I eligible for a loan under Atmanirbhar Bharat Abhiyan?

   Yes, your business will be considered a small enterprise and hence you can avail investment of up to Rs.10 crore.

7. Is there any moratorium period provided by the government for the payment of business loans?

   Yes, you will be given a repayment tenure of 4 years including a moratorium period of 1 year.

8. The turnover of my business is Rs.80 crore. What type of business enterprise will my unit qualify as?

   Your business unit will be considered as medium enterprise and you can avail investment of up to Rs.20 crore.

9. What are the criteria for a business to be considered a micro enterprise?

   The Central Government finally decided to alter the long-standing definition of MSMEs and increased the investment limit. As per the new definition, units with investments up to Rs.1 crore and turnover up to Rs.5 crore will be considered as micro enterprise.

10. Will trade fairs and exhibitions continue to happen?

    No, trade fairs and exhibitions will not take place anymore. Infact, MSMEs will be provided with e-market linkage and will be promoted as a replacement for trade fairs and exhibitions. Fintech will be the tool which will be used in order to increase transaction-based lending by using the data generated by the e-marketplace.