Business - loan

What is Business Loan ?

Business loans provides the financial assistance to companies to meet the urgent needs of their growing industry. Businesses need plenty amount of investment to fund expenses related to expansion such as buying machinery, boost production by adding new lines to their existing products or services.

These loans, like any other loan, is a liability which the company is indebted to pack back to the lender within specified tenure mentioned in the loan agreement. One of the major benefit of business loans is that it does not require any collateral. Most of the banks or financial institutions sanction the loans with minimal prepayment charges.

Start-up business loans can also be availed for various essential requirements like starting up a new firm, business extensions, trader and merchant financing, etc. Various special schemes are also available including business for women, Mudra scheme for smaller businesses as well as small business loans for professionals.

In addition to this, banks or the loan lenders also offer special privileges for business loans, such as overdraft facility and flexible tenure option and many more.

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Benefits of Business Loan

High Loan Amount:
Business loans can be availed for as small as an amount of Rs. 30,000 or larger amount up to Rs.30 lakh depending on various factors including existing business debts, size of the business, reported profits of the business, etc.
Flexibility in Loan Tenure:
The term period of the business loan varies from 12 months to 48 months. In maximum cases, the borrower can avail the benefit of prepayment with a nominal prepayment charge, which offers extra flexibility to the borrower.
Easy Documentation:
Like the personal loan, business loan comes with a very simple documentation process and the turnaround time for approval is relatively short. Collateral-free loan: These loans do not keep collaterals for financing the loan amount to customers. And if the customer fails in repaying the debt during the tenure, then the entire company is bankrupted in order to clear the loan debt.
Varying Interest Rate:
Interest rate for business loans varies from 17% to 25% and it depends on various factors other than eligibility of the applicant, credit card score of applicant, size of the business, type of business and term period of the loan.

Categories of Business Loan

Overdrafts:
An overdraft means overdrawing from a current account i.e. an account holder can withdraw more amount of money than what has been deposited in the account to meet the business requirements. If the overdrawn amount is within the limits of a former agreement, an agreed rate of interest is charged. And there is no charge of interest if the business does not avail this overdraft facility.
Term loans:
There are many terms loans available such as short term, long term loans as well as intermediate term loans. The loan category id decided by the industrialist according to their requirements and economic situation. There are minimal variations in the rate of interest depending on the loan tenure. Short term loans are a minimum for 3 years and long term loans are a minimum for 10–15 years. An if the customer decides to foreclose the loan, the lending institutions charges a prepayment penalty. Term loans are also divided into two sub categories, unsecured and secured loans. These differ on the basis of deposition of collaterals for availing the loan. And since secured loans are given against the collaterals, they feature lower interest rate than the unsecured loan.
Bill discounting:
 In this type of business loan the borrower gets immediate cash back on various large purchases and this amounts to discount on all credit transactions.
Letter of Credit:
This letter of credit is issued by the loan lending bank which states that a seller will receive the full payment with the fulfillment of all the terms and conditions regarding sale and delivery. This is usually for international business finances where the seller and buyer are often unknown to each other, hence the business transactions are based on the bank’s credit value.
Bank Guarantee:
This is a unique type of pre-approved secured business loan that is availed by various business companies including SMEs such as private limited companies, public limited companies, partnership firms and proprietorship firms. These are generally provided against multiple types of securities including industrial, commercial and residential property. A bank guarantee thus allows a growing business to draw down loans, buy equipment or extra goods on credit.
Special Schemes for Women Entrepreneurs:
These business loans are exclusive for women where they are provided with relaxation in terms of interest rates, applicable securities and acceptable loan amounts. Some banks also provide with the facilities of business consulting, counselling and training along with various opportunities for marketing and showcasing their product.
MUDRA YOJANA:
This is a special government sponsored scheme for small and medium businesses including those owned by women. Though this funding is provided through the banks, it is the government of India who provides the required amount to the bank. These are offered at lower rate of interest as compared to other standard business loans.

Business Loan Eligibility Criteria & Required (Common)Documents

Top Business Loan Providers

  • State Bank Of India
  • Bank Of India
  • Punjab National Bank
  •  Bank of Baroda
  • Indian Bank
  • United Bank of India
  • PNB, Central Bank of India
  • HDFC Bank Business Loan
  • ICICI Bank Business Loan
  • Axis Bank Business Loan
  • LIC Housing Finance Ltd
  • AIG Home Finance India Ltd

Frequently Asked Answers (FAQs)

Have a dream to become a successful businessman but have no money? Looking for a way to get financing help for a start-up business? Get a loan for your start-up business. Get Startup business help from private banks, Bank loans, and various government schemes. You can also get Startup business help from the government.  New government schemes like start-up India and Make India helps the youth for an easy loan for start-up business in India. It helps in Financing for start-up Business. India promotes start-up business ideas and plans from youth who desire to start their own big or small start-up business with a little money. You can easily get financial help for business through different other sources apart from taking Business credits, crowdfunding, friends and relatives, business credits. You can be eligible for Startup equipment financing. There are many private banks which provide credit for business. Pradhan Mantri Mudra Yojana for Start-Up is also another government scheme to provide financial help to entrepreneurs. The tenure for repaying the loan is 5 years and the interest rate varies from 10% to 21% per annum.

Wondering how to get a loan under start-up India? Visit start-up portal “www.startupindia.gov.in” to fill up your application form for a loan under startup India schemes. You are required to provide true information about your registered company. You have to provide the details of the legal entity, incorporation date & number,  PAN number & address details of your company. The type of firm or company can be a Partnership firm, Limited liability partnership firm or a private limited company. The information should disclose all the details about authorized representatives, directors/partners of the business. Be prepared with your documents like the registration certificate of the company and self-certification of the essential documents provided in the application. Hurry to fill your application form for business loans by presenting your unique business plans.

Get a loan on existing Business in India through different government and private financial Institution. You can get a business loan at better loan rates from P2P (Peer to peer) business loans, NBFCs, Banks which are regulated by RBI. Private Banks Tata Capital Business Loan, ICIC Bank, Axis Bank, RBL Bank business loan also provide financial help for business in India. Check out different government schemes for business loans in India at a better loan rate: 

  • MSME helps to get financial assistance in 59 minutes up to INR 1 crore 
  • MUDRA Loans can get financial assistance from INR 5000 to INR 10,00,000 from public sector Banks
  • Credit Guarantee Fund Scheme for Micro and Small Enterprises ( CGTMSE): Get up to 10 lakhs rupees from Public and Private Sector Banks
  • National Small Industries Corporation subsidy (NSIC) will help you to get financial help for raw materials and Marketing with a low-interest rate. 
  • Credit Link Capital Subsidy Scheme for Technology can help you to get a business loan up to 12 lakhs.

Eligibility for Business Loan in India depends on the duration of the business, profits earned in past years, revenue generation, cash flow, loan repayment ability, credit history, past clear dues and many other factors. The company should have cleared past dues. It should disclose about its past profits, Annual Turnover, business transactions, credit history. It should not have a challenged credit history.

Check out the list of important documents required for a business loan:

  • Registration certificate of the company
  • Identity of partners or directors
  • Adhar card
  • Address proof
  • PAN Card
  • Articles of Associations
  • Partnership deed
  • Financial statements
  • Business ownership proof
  • Audit reports
  • Income proof of past 2 years
  • Other mandatory documents like lease agreement/sales Tax / ITR/ Trade License/ board resolution

The eligibility criteria for a business loan is various from bank to bank. The general eligibility criteria include:

  • The minimum age limit of 21 years and maximum age limit of 65years.
  • The business should have ensured Profits in the past two years
  • Minimum turn over of INR 150,000 annual incomes of the business

Credit Information Bureau of India is responsible to check the credit score of the companies in India.  A good credit score works as a goodwill for the company to get a business loan at a good interest rate. You should maintain a good credit score to take loans from the financial markets easily. In case you have a bad credit score it may hamper your business. Banks and other financial institutions won’t trust you to provide a loan if you already have a probability of not paying back the loan. Nobody wants to take a risk of bad debt by providing loan to a company or person who has poor credit. There is still scope for you to take a business loan with bad credit. You can go for small term business loan for 3 to 18 months duration, short term credit lines of credit, equipment financing or use business credit cards. Non-Banking Financial Institution (NBFCs) can also provide you business loans at a high-interest rate. These type of loans can be expensive but the best solution to get financial help.

New entrepreneurs are awarded tax holidays for 3 years by the government which is a plus point people who are planning for a start-up business. Under start-up India scheme, you can get a minimum of 10 lakhs business loan and maximum loan up to 1 crore. Different banks have different limits of granting load for a business purpose. State Bank of India (SBI) offers minimum 50 lakhs business loan help to the creditors and it can maximum give up to 10 crore rupees business loans. It gives 66 months duration for repayment of the business loan.

Entrepreneurs who want to start up business or expand their business but don’t have enough financial sources can easily get a loan for business. There are different ways to gather money and gear up your business. You can get money through Angle Investors, Crowd Funding, Credit cards, etc. Getting a secured loan with a good interest rate is the safest way to borrow money. You can provide financial help to your business through Bank Loans, Startup India schemes by the government in India. You can also get a loan with no money through Business line of Credit, SBA Microloan and Business line of credit. 

It normally takes time for sanctioning the huge amount as a business loan. It can take a couple of day or weeks to get your loan approved by the debtor. It needs time to verify the information to avoid the risk of bad debt before sanctioning the loan amount. After the loan gets approved it may take a day for the transaction of the loan amount to your account.

You can apply for a business loan through online or offline. Online application for a business loan is now the most convenient way to apply for a loan. There may not be any application fees for applying for a business loan online expect a few cases where you may be charged for the administrative expenses for the process of the application for a business loan. The cost shall be minimal depending on the business loan amount you have opted.

SBI (SME) funding for small business loans for equipment, plants, and machinery from INR 2 crore to INR 5 Crore. If you are a women entrepreneur then you definitely have the right to enjoy benefits under attractive loan schemes offering loan at the lowest rate starting from 0.25% to 1 %. You can take business loans from HDFC Bank, ICIC Bank, Small Business Startup Funding- SIDBI, Mudra Bank, Venture Capital Fund, start-up India scheme and many more.

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