A business loan is an unsecured loan available for both new and existing firms. You can avail of a business loan in all situations, be it expansion, asset investment, hiring, or debt repayment. Currently, there are various banks and financial institutions in the market where one can apply for a business loan at low-interest rates. Go through this article to know more about business loans.
Key Features and Benefits of a Business Loan
Before you choose and apply for a business loan, it is important to have a clear picture of the benefits and features of a small business loan –
- Accessible – Business loans are available in the market for all types of businesses. Generally, high-value firms get a loan of up to ₹75 Lakhs at low-interest rates which are very suitable for short-term, long term or intermediate-term funding.
- Flexible – One of the major benefits of a business loan is that you can withdraw the loan money as per your requirements. No interest is charged by the lender on the withdrawn money.
- Unsecured Loans – Business loans are unsecured loans, which means that you do not need any kind of collateral security. This makes it easy for any individual to apply for a business loan without worrying about collateral terms and conditions.
- Hassle-free and Quick – The procedure to apply for a business loan is quick and hassle-free. The loan amount is disbursed within a few hours of application acceptance.
- Offers – Customized offers and reward schemes make the overall loan experience more amazing for the borrowers.
Eligibility Criteria of a Business Loan
If you wish to get a small business loan, you must first check if you fit the eligibility criteria fixed by the company. The criteria to apply for a business loan varies from lender to lender but on a general basis the major points included in eligibility criteria are:
- Applicant should be a native of India
- Applicant should be a self-employed individual
- The minimum and maximum age of the applicant must be 25 years and 65 years respectively.
- The ITR (minimum annual income) of the applicant must be ₹1.5 lakh.
- Applicant must at least have an experience of three years in the existing business or five years as an entrepreneur (in the case of an old business).
- Business entities like partnerships, private limited companies, and limited liability partnerships can also apply for a business loan.
Documents Required for a Business Loan
Documentation plays a crucial role in the application procedure for any type of loan. If you want to apply for a business loan, you must keep your required documents ready in hand to avoid any type of hassle. The documentation process for a small business loan varies from lender to lender but on a general basis, the documents required are –
- Identity Proof – Aadhaar Card/PAN card/ Passport/Driving License/Voter’s ID. Any of the above-mentioned documents can be used as identity proof.
- Address Proof – Aadhaar Card/PAN card/ Passport/Utility bills/lease agreements. Any of the above-mentioned documents can be used as identity proof.
- Bank records and statements of business for 6 previous months.
- Sole Proprietorship Declaration (in case of sole proprietor firm)
- Verified copy of Partnership Agreement (in case of partnership firm)
- ITR form of 2 previous years, income computation records, balance sheet, P&L, etc.
How to Apply for a Business Loan.
The application procedure for a small business loan is very basic and quick. It is designed to facilitate the comfort of the applicant with a fast and hassle-free process. Here is the step-by-step guide that one can follow to apply for a business loan –
- The first and foremost important step for availing of a business loan is to look for various loan options offered by various lenders and compare them to find the best deal.
- Once you have your bank/lender chosen, go through all the terms and conditions fixed by the bank regarding the business loans.
- Visit the official portal of the selected lender and fill in the application form for business loans.
- A list of all the types of business loans offered by that bank will be displayed on your screen. Go through those options and choose the loan type.
- Once you select the type of loan, you will be redirected to a page where you have to fill in the details related to the loan like my required loan amount, repayment periods, interest rates, etc.
- After filling in the details, submit the form along with the required documents.
- Once you apply for a business loan, your form is sent for review. If your application is accepted, your loan amount will be disbursed within a few hours.
Things to Remember while Applying for a Business Loan
- Make sure you have all the required documents ready before starting your application process.
- Make sure you choose the lender only after comparing all the possible loan offers.
- Make sure you evaluate the required loan amount beforehand only, to avoid capital wastage in the future.
- Make sure you read all the terms and conditions regarding the business loan before starting the application procedure.
- Make sure you evaluate the EMI amount and check if it fits in your budget planning or not.
What is the interest rate for a business loan?
The interest rate for a business loan varies from bank to bank and scheme to scheme. Usually, the interest rate starts from 12%.
Will I have to pay a processing fee for a business loan?
Yes, you will have to pay a processing fee for a business loan. The processing fee is generally 2-3% of the sanctioned loan amount.
What is the maximum repayment tenure for a business loan?
The maximum repayment tenure for a business loan is 60 months.
How much amount can I get in a business loan?
The minimum and maximum amount that can be sanctioned for a business loan are ₹25,000 and ₹75 lakhs respectively.
Is a business loan a good source of capital funding for a business?
Yes, a business loan is a good source of capital funding for any company. This is because the business loan is more affordable and has better leverage.