A business loan is an unsecured loan available to new and existing businesses. You can make use of a business loan in all situations, whether it is expansion, asset investment, contracting or debt payment. Currently, there are several banks and financial institutions in the market where you can apply for a business loan at low interest rates. Read this article to learn more about business loans.
Key Features and Benefits of a Business Loan
Before choosing and applying for a business loan, it is important to have a clear idea of the benefits and features of a small business loan:
- Affordable: Business loans are available in the market for all types of businesses. In general, high-value companies get a loan of up to ₹75 Lakhs at low interest rates that are well suited for short, long or medium-term financing.
- Flexible – One of the main benefits of a business loan is that you can withdraw the money from the loan based on your requirements. The lender does not charge interest on the money withdrawn.
- Unsecured Loans: Business loans are unsecured loans, which means you don’t need any collateral. This makes it easy for any individual to apply for a business loan without worrying about the terms and conditions of the collateral.
- Hassle-free and fast: The procedure to apply for a business loan is fast and hassle-free. The loan amount is disbursed within a few hours of acceptance of the application.
- Offers: Personalized offers and reward schemes make the overall loan experience more amazing for borrowers.
Business Loan Eligibility Criteria
If you want to get a small business loan, you must first check if you meet the eligibility criteria set by the business. The criteria for applying for a business loan vary from one lender to another, but in general, the main points included in the eligibility criteria are:
- The applicant must be a native of India.
- The applicant must be a self-employed person
- The minimum and maximum age of the applicant must be 25 years and 65 years respectively.
- The ITR (Minimum Annual Income) of the applicant should be ₹1.5 lakh.
- The applicant must have at least three years of experience in the existing business or five years as an entrepreneur (in the case of an old business).
- Business entities such as partnerships, private corporations, and limited liability companies can also apply for a business loan.
Documents needed 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 should have the required documents on hand to avoid any kind of hassle. The documentation process for a small business loan varies from lender to lender, but in general, the required documents are:
- Proof of identity: Aadhaar card/PAN card/passport/driver’s license/voter ID. Any of the documents mentioned above can be used as proof of identity.
- Proof of address: Aadhaar card/PAN card/passport/utility bills/lease agreements. Any of the documents mentioned above can be used as proof of identity.
- Bank records and commercial statements of the previous 6 months.
- Sole proprietorship statement (in case of sole proprietorship business)
- Verified copy of the Partnership Agreement (in case of a partnership company)
- ITR form of 2 previous years, income calculation 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 fast. It is designed to facilitate the applicant’s convenience with a quick and hassle-free process. Here is the step by step guide that one can follow to apply for a business loan:
- The first and most important step in taking advantage of a business loan is to research various loan options offered by various lenders and compare them to find the best deal.
- Once you have chosen your bank/lender, review all the terms and conditions set by the bank regarding business loans.
- Visit the official portal of the selected lender and fill out the business loan application form.
- A list of all types of business loans offered by that bank will be displayed on your screen. Review those options and choose the type of loan.
- Once you select the type of loan, you will be redirected to a page where you need to fill in the details related to the loan, such as the required loan amount, payment 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 submitted for your review. If your application is accepted, 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.
- Be sure to choose the lender only after comparing all possible loan offers.
- Be sure to assess the required loan amount only beforehand, to avoid wasting capital in the future.
- Be sure to read all the terms and conditions related to the business loan before starting the application process.
- Be sure to assess the amount of EMI and check whether or not it fits into your budget planning.
What is the interest rate on a business loan?
The interest rate for a business loan varies from bank to bank and plan to plan. 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 payment term for a commercial loan?
The maximum repayment term for a commercial loan is 60 months.
How much 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 financing for a business?
Yes, a business loan is a good source of capital financing for any business. This is because the business loan is more affordable and has better leverage.