How to Apply for a Business Loan?

| Updated on March 27, 2024

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 No interest is charged by the lender on the withdrawn money.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

FAQ

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.





John M. Flood

John is a crypto enthusiast, Fintech writer, and stock trader. His writings provide guides to perform your best in the crypto world and stock planet. He is a B-Tech graduate from Stanford University and also holds a certification in creative writing. John also has 5 years of experience in exploring and understanding better about the FinTech industry. Over time, he gained experience and expertise by implementing his customized strategies to play in the crypto market.

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