Business Loan Details
Business Loan Overview
A business loan is a type of funding assistance provided by banks and NBFCs to meet the financial needs of self-employed, business owners, entrepreneurs, and a variety of other entities. Let’s take a look at the overall picture of Business Loan.
Business Loan is a kind of loan that companies for investment in their various expenditures.
- Loan for business is a kind of debt that the company needs to pay back following the rules and regulations of the loan.
- Many start-ups take a loan for a lot of purposes like business expansions, starting new firms, financing dealers and vendors.
- The loan for business does not require any kind of security.
- The pre payment charges for this type of loans are very less.
- The business owner does not individually bear the loan burden in case he fails to pay the loan for business.
- The loan for business does not affect the personal property of the business owner.
- You can either go for a loan online apply or offline apply.
- When you Apply for Business Loan Online you can check the different rates of interest.
- The minimum loan tenure for a business is 12 months and maximum tenure is 48 months.
- The Loan interest rate of business starts from 14.99%. It varies from bank to bank. You should select a bank keeping in mind their rate of interest.
- It requires simple and easy documentation. There are no complicated procedures involved.
- The minimum amount of loan is 3 lakhs.
- It is an unsecured loan and does not require any collateral. The unsecured loan does not require any kind of security.
- Letter of Credit:
- In the letter of credit it is clearly mentioned that the seller will receive the payment fully when all the terms and conditions regarding the sale and delivery have finished.
- This type of situation arises in international business finance when the seller does not know the buyer and vice versa.
- The documents required by the seller to get the payment are transportation documents, insurance certificates, commercial documents like invoice and lading bills and official documents such as inspection certificate, original certificate, commercial and legal document.
- Bill discounting:
- This allows you to get the cash back instantly on big purchases.
- You also get a discount on the sale of the credit.
- You need to submit documents that show your transactions like an invoice, lading bills transportation receipts, etc.
- Term Loans:
- There are different types of term business loan available like a short term loan, intermediate loan, and long term loan.
- An entrepreneur can take this loan with respect to his or her needs and economical status.
- The tenure for short term loan is 3 years.
- The tenure for the long term loan is 10 to 15 years.
- This requires overdrawing from a current account.
- An account holder takes out more money than what has been deposited.
- An agreed rate of interest is charged.
In order to apply for a loan and get it sanctioned by the bank you need to meet the eligibility criteria.
If all the requirements for eligibility are met then the chances of sanction of the loan increases.
Below is mentioned the loan eligibility.
- You must be 21 to 65 years old.
- You must be a self employed person or should run a private company or have a limited firm.
- You can also be a manufacturer or service provider.
- Your business should be of at least 3 years.
- Submission of the ITR statements of the last three years.
- The business turn over for your bank should be at least 50 lakhs with a minimum profit of 2 lakhs.
- If you apply with a co partner of your business then the chances of approval of the loan increases.
- You get different rates of interest for bank loan.The rate of some of the banks are mentioned below:
- Axis Bank: from 12.00%
- SBI Bank: from 9.60%
- HDFC Bank: from 6.00%
- ICICI Bank: from 6.00%
- RBL Bank: from 12.00%
- Tata Capital: from 12.00%
- Zip Loan: from 6.00%
- Kotak bank: from 10.75 %
- Standard Chartered: from 11.00%
- Bank account statements.
- The income tax statements for the last three years.
- Proof of business
- Practice Certificate
- Proof of residence
- KYC documents of a co-applicant
- Recent photographs.
- Identity proof like Aadhar card, PAN card, voter ID card, etc.
- Proof of residence which can include your electricity bill or passport.
- The amount of loan that one can get depends up on the profit of the business annually and the number of years into that business. The more the number of years in the bank, the better the chances of loan approval.
- When all these factors have been taken care of the bank decides the loan amount.
- The major criteria for a loan are the amount of profit the business is making. If your business is making a good amount of profit then your loan can be sanctioned easily.
- The bank also takes into account how will the borrower manage to pay the EMIs. It needs to make sure whether or not the borrower will be able to pay the EMI.
Business startup loan sees your credit worthiness and checks your repayment and reliability.
Due to this reason the banks see your financial history and check the record of your business. This enables the bank to get an idea of whether or not you will be able to repay back the loan amount.
It is due to this reason that it is very difficult to get a startup loan as the banks cannot guarantee that they will be trust worthy client. The startups do not have any history of loan and therefore it is not easy for the banks to sanction the loan.
In such cases the bank takes into account your financial background, credit history, education and business plans, education, liabilities, loan record of existing loans.
Therefore you need a well structured and professional plan before you approach a bank for a business startup loan. Make sure your presentation is really good and you are precise about the need for the loan amount.
You should have a proper analysis of your business plan and have detailed information about the market value of your products and the way you are going to lead them.
There are different types of business startup loans depending on the tenure. For example there are medium and small loan and long term loans.
The following are the requirements of loan for business that you need to keep in mind before applying for one:
- Your credit score should be good and it should be between 700 to 900 points.
- You should have some fund with you in case the lender wants you to give something as a security amount. This condition generally does not arise but you should keep in mind all the scenarios.
- You should make sure that you meet the eligibility criteria of the loan and you also have all the documents ready. It is very important for you to meet the eligibility criteria.
- When you apply for a business startup loan you must maintain a database of the company’s financial situation and the past performance of the company along with the cash flow statement.
- If you want a loan for a new business then you should focus a lot on the idea and presentation of the business. It is extremely mandatory for you to communicate your need for the loan to the money lender in a proper way.
- You also need to be very precise as to why you need the money. Unless and until you are very clear about why you need the money you cannot convince the money lender to lend you the loan.
- You should provide a clear description of how you will utilize the money. The lender will need to know your method of utilization of the money in a proper manner.
- This will be a clear indication of how focused you are
- When can I take a Loan for Business?
When your business is at an initial growth stage and you need additional finances in order to maintain the momentum of the business, you can take a loan for business.
If you want a loan for business without security then you can apply for a loan.
- How does a line of credit work?
- It is a type of credit facility given to the applicants of the loan which approves you a certain amount of credit or loan for business a fixed duration.
- The installment that you make monthly for the line of Credit will consist of the amount of interest and will not contain a principal amount.
- You need to pay the principal amount at the end of the tenure of the facility of the loan for business.
- You can deposit money when you have them and then take out money for your need when you apply for a loan for business.
- You will have to pay interest for the money utilized by you.
- Can the credit limit for a business loan be increased?
- Yes the credit limit for a loan for business can be increased.
- It is subjected to your eligibility criteria when you request for the loan.
- Can the business startup loan be given without collateral?
Yes, the loan can be given without collateral.
- Can I apply online for a loan for business?
Yes you can go for a loan online apply option.
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