How to Apply for a Business Loan

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 No interest is charged by the lender on the withdrawn money.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.

FAQs

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.