A business loan is an unsecured loan available to both new and existing companies. You can take advantage of a business loan in any situation, be it expansion, property investment, hiring, or debt repayment. Currently, there are many banks and financial institutions in the market where one can apply for a business loan with a low interest rate. 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’s important to have a clear picture of the benefits and characteristics of a small business loan –
- Accessible – Business loans are available in the market for all types of businesses. Generally, high value companies get loans up to ₹75 Lakhs with low interest, which is great for short, long term or medium term funding.
- Flexibility – One of the key benefits of a business loan is that you can withdraw the loan as you wish. Lenders do not charge interest on withdrawals.
- Unsecured Loan – A business loan is an unsecured loan, which means you don’t need any kind of collateral. This makes it easy for any individual to apply for a business loan without worrying about mortgage terms and conditions.
- Hassle-free and fast – The business loan application process is quick and hassle-free. The loan amount is disbursed within a few hours of accepting the application.
- Incentives – Custom offers and rewards modes make the overall lending experience even better for borrowers.
Business Loan Eligibility Criteria
If you want to get a small business loan, you must first check that you fit the eligibility criteria set by the company. The criteria for applying for a business loan vary among lenders but on a general basis the key points included in the eligibility criteria are:
- Applicant must be of Indian descent
- The applicant must be a self-employed individual
- The minimum and maximum age of the applicant must be 25 and 65 years, respectively.
- The applicant’s ITR (minimum annual income) must be ₹1.5 lakh.
- The applicant must have at least three years of experience in the current business or five years as an entrepreneur (in the case of a former business).
- Business entities such as partnerships, private limited liability companies, and limited liability partnerships can also apply for a business loan.
Documents required for a business loan
Documentation plays an important role in the application procedure for any type of loan. If you want to apply for a business loan, you must have the necessary documents ready to avoid any hassle. The application process for a small business loan varies from lender to lender but on a general basis the required documents are –
- Proof of Identity – Aadhaar card/PAN card/Passport/Driver’s License/Voter ID. Any of the above documents can be used as proof of identity.
- Proof of address – Aadhaar card/PAN card/Passport/Utilities bill/rental contract. Any of the above documents can be used as proof of identity.
- Bank records and business statements for the previous 6 months.
- Sole proprietorship statement (in case of sole proprietorship)
- Certified copy of Partnership Agreement (in case of partnership)
- 2 years ago ITR forms, earnings records, balance sheets, P&Ls, etc.
How to Apply for a Business Loan |
The small business loan application process is very basic and quick. It is designed to facilitate applicants with a quick and hassle-free process. Here is a step by step guide that one can follow to apply for a business loan –
- The first and most important step to using a business loan is to look for different loan options offered by various lenders and compare them to find the best deal.
- Once you have selected your bank/lender, go through all the terms and conditions set by the bank regarding business loans.
- Visit the official portal of your chosen lender and fill out the business loan application form.
- 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.
- After you choose the loan type, you will be redirected to a page where you have to fill in the loan related details like my requested loan amount, repayment term, interest rate, etc.
- After filling in the details, submit the form along with the required documents.
- When you apply for a business loan, your form will be submitted for review. If your application is approved, your loan amount will be disbursed within a few hours.
Things to remember when applying for a business loan
- Make sure you have all the required documents ready before starting the application process.
- Make sure you choose a lender only after comparing all possible loan offers.
- Make sure you only pre-evaluate the amount needed for the loan, to avoid wasting capital in the future.
- Make sure that you have read all the terms and conditions related to a business loan before starting the application process.
- Make sure you evaluate the amount of EMI and check if it fits your budget plan.
Frequently asked questions
What is the interest rate on a business loan?
Interest rates for a business loan vary between banks and plan programs. Typically, interest rates start at 12%.
Do I have to pay a business loan processing fee?
Yes, you will have to pay a business loan processing fee. The processing fee is usually 2-3% of the loan amount sanctioned.
What is the maximum repayment term for a business loan?
The maximum repayment period for a business loan is 60 months.
How much money can I get in a business loan?
The minimum and maximum sanctionable amounts for a business loan are ₹25,000 and ₹75 lakhs respectively.
Is a business loan a good source of funding for a business?
Well, a business loan is a good source of capital financing for any company. This is because business loans are more affordable and have better leverage.
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Source: vothisaucamau.edu.vn
