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BUSINESS LOAN

If you are planning to apply for a business loan and want to know the complete details for a business loan can see all the relevant details in the article below. Here we are going to provide you the details about the Business Loans. A business loan is nothing but a loan taken from the banks to invest on something on which you want to set up your business. You can borrow money from the bank for your small business and can repay them with some amount monthly with a fixed interest rate.

A loan which is particularly applied for the business purpose is Business loan. The customer has to repay this amount with interest to the taken amount with the decided interest rates. The applicants who are taking the business loans to own your small business, they also have to think about their personal credit scores. As the personal credit scores will also impact by taking these Business loans. If the applicants are using their personal credit cards to invest in their business then debt taken for business also affects personal credits. Before applying for the business loan know the required eligibility to avail a business loan. The following uses of business loan are :

  •  To purchase land or space for business operations

  •  To purchase equipment, machinery and raw materials

  • To pay rent, salaries, hire employees, staff training etc.

  •   For office renovatio

  •   For business growth or relocation

Secured vs Unsecured business loans

When you take a loan for your business and provide an asset (your home, other business etc.) as a security to the bank/finance company is an secured business loan. The bank/finance company offered lower interest rates for secured loans compared to unsecured loans, making it much more beneficial. However, if you default in your payments, you will have to leave the assets given to the bank / finance company as security.

Business Loan Features

Loans can be great solutions for businesses that don't want the hassle that often comes with finding an investor or business partner. However, ensuring that you will be able to pay back the amount that you borrow is essential because your assets could be taken from you as collateral if you fail to make the repayments.

1. Flexibility of loan tenure

2. Higher tenure to suit your capital expenditure requirements

3. Higher loan eligibility

4. Required minimal documentation

5. Competitive interest rate

6. Accessible and Convenient

7. Short-term option.

8. Expanding your product range.

9. Create the infrastructure.

10. Stock or working capital

Business Loans Benefits

Use the fund for any business-oriented purpose depending on your requirements

1. Lower-interest rates, when compared to other premium loan products in the market

2. Easy repayment options, in the form of fixed monthly EMIs

3. Easy to avail and no need for submitting collateral

4. Helps your business gain an edge over your competitors

Why should you get a business loan?

There are various reasons companies require finance, though upgrading necessary machinery and improving cash flow are some of the most popular reasons. Here are some common reasons companies apply for a business loan:

1. Starting your business

2. Running your business

3. Expanding your business

Things to Consider When Applying for a Business Loan

Listed below are a few points that you should consider before availing a business loan:

  • Choose the right type of business loan

  • Assess how much money you need

  • Prepare a cash flow forecast

  • Improve your credit score 

  • Look for flexible repayment terms

  • Compare multiple lenders

Business Loan Things Not Consider When Applying 

Listed below are a few points that you should not consider before availing a business loan:

  • Apply for more than one loan at a go

  • Borrow more than you require 

  • Neglect carrying your financial papers

  • Hide your liabilities from the lender

  • Underestimate your business expenses

  • Choose a very short tenure

  • Focus on the interest rate alone

Business Loan Processing Fee and Charges 

To apply for a business loan, you have to pay fees and charges applied by the Bank. It covers all charges and fees made by a bank to their customers.The following charges are taken from the Bank is joining fee, annual fee, interest rate, late payments charges etc.

TYPE

CHARGES

Interest rate

10% to 12%

Loan Amount

Rs.50000 to Rs 50 lakh

Tenure Period

1 years to 10 years

Processing Fee

Upto 2.50% of the loan amount

Prepayment Charges

No pre payment permitted until repayment of 6 EMIs

After 7 EMIs : Upto 4% on the balance

Late payment of EMI Charges

Upto 3% p.a. on EMI/ Principal overdue

Required Eligibility Criteria for Business Loan 

Anyone can get a business loan with or without security. This only depends on the bank's rules which are offering you a loan amount and along with the risk on the amount they are ready to take. Everything matters when you are applying for a business loan like you are taking a loan to start a new business or you are applying it for extending the running business. This makes differences in surety. You will get your loan amount very soon if you meet all the required eligibility criteria once the documentation is done.

ELIGIBLE

Self employed individuals, Proprietors, Private ltd. Company and partnership firms

AGE

21 years to 65 years

TURNOVER

More than Rs.25 crore

EXPERIENCE

Total experience is 5 years

Individual who have been in the current business for a minimum 3 years

Documents Required for a Business Loan

Any applicant who is going to avail a business loan must have to submit the following documents. These documents are the requirements for the lenders who are providing you the amount of loan.

1. Signed Application Form : The applicants should submit the complete filled in application form provided to them by the lenders along with one passport sized photograph.

2. Identity Proof : To submit this identity proof, you can submit any one of the following like PAN Card/ Passport/ Voter Id card/ Driving License/ Aadhar card.

3. Residential Address Proof : For address proof you can submit any of the following as Ration card/ Telephone bill/ Electricity Bill/ Passport/ Sales tax certificate/ Lease agreement/ Trade License

4. Certificate and Proof of Business : Existence.Along with the above documents these are also the mandatory certificates to be submitted such as true copy of the certified articles of Association and memorandum, sole proprietorship declaration. Audited financials of the last three years.

5. Age proof : Voter Id/ PAN Card. Passport any one can be submitted for the proof of age.

6. Income Proof : Last 3 years ITR (income tax returns) (self and business), profit and loss account, balance sheets certified/audited by a CA. Last 12 months bank account statement (self and business)

  • Self Employed applicants who are non-professionals : Profit and loss balance sheets for the last two years need to be given which should be audited by the CA (chartered Accountant). Bank statements and It return copies of the last two years.

  • Professional & Self Employed individuals : Bank statements of the last six months and It return copies of the last two years. Balance sheets audited by the CA of profit and Loss.

  • Private Ltd. Co. & Partnership Self Employed : IT returns copies of the last two years and Bank statements of the last six month. P and L balance sheets audited by the CA.

Types of Business Loans In India

1. Term Loan: Large lump sums of cash that are best for large purchases where it'd be advantageous to spread the large payment over a period of time

2. Business lines of credit: Large revolving lines of credit that are ideal for cyclical cash flow problems

3. SBA Loans :Variety of loans offered by different lenders that are guaranteed by the SBA, which reduces rates and fees but make the loans harder to qualify for than loans from online lenders

4. Business Credit Cards: Best for small, everyday purchases

5. Commercial Real Estate Loans: Ideal for real estate specific expenses

6. Equipment Financing: Best for purchasing large machinery or vehicles

7. Peer-to-peer lending: For borrowers who want lower rates than most online lenders but can't qualify with traditional lenders

8. Personal Loans: Easier requirements allow for startups to use personal loans as working capital

9. Invoice Factoring: For businesses that can't qualify for competitive term loans or lines of credit from traditional or online lenders and have invoices that aren't being paid on time

10. Merchant Cash Advance: Businesses with frequent and large volumes of transactions like retail stores will benefit from the lowest rates

Business Loan Uses

You can use a business loan for the following purposes i.e. : 

  • Increase your business cash flow

  • Lease bigger office premises

  • Renovate your office

  • Purchase, lease or repair machinery and equipment

  • Upgrade to the latest technology

  • Stock up on inventory

  • Hire seasonal employees

  • Purchase raw material for bulk orders

  • Expand to another area or city

  • Scale-up operations and take on bigger projects and much more

How to apply Online for a Business loans?

1. Offline Method

  • At the bank branch. - You can visit a branch of the bank from which you want to take a personal loan. You'll need to fill out an application form and submit it along with all the documents required.

  • Through an agent. – Banks have agents who sell personal loans.

2. Online Method 

  • Fill up the online application form of business loan to apply.

  • Submit all the relevant documents to complete the process.

  • Get money in the bank within 24 hours.

Special Schemes for Women Entrepreneurs

Nowadays, banks are giving attractive schemes for women enterpreneurs. These lending schemes are exclusively for women and it gives them relief in terms of interest rates and collateral. Some of the banks also have special departments for women entrepreneurs where they provide them business consulting, training and counseling along with avenues for marketing and showcasing of their products. Women entrepreneurs whose ownership is less than 50% in the company are not eligible to avail the benefits of the women’s special schemes.

Some of the popular loan schemes for women entrepreneurs are as follows :

  • Mahila Udyam Nidhi Scheme

  • Mahila Samridhi Yojna

  • Cent Kalyani from Central Bank of India

  • Stree Shakti Package from State Bank of India

  • Shringaar and Annapurna from Bhartiya Mahila Bank

  • Dena Shakti Scheme from Dena Bank

Compare other banks business loan interest rates

BANKS 

INTEREST RATE 

HDFC Bank Business Loan

15.65% to 21.20%

Yes Bank Business Loan

16.25% to 19.99%

Citi Bank Business Loan

12% to 16%

RBL Bank Business Loan

10.65% to 16.25%

Indian Bank Business Loan

8.30%

Business Loan EMI and How to Calculate

Different types of business loans can be repaid in different ways. One of the easiest ways to repay a business loan is through Equated Monthly Instalments (EMIs). Your loan is divided into equal fixed sums that are paid on a monthly basis till the full repayment of the loan. An EMI consists of two parts, the principal loan amount and the accrued interest. Small and medium businesses find it easier to repay business loans with EMIs, as the method allows them to fund expensive assets and expansions without straining their smaller operating budgets. 

Business loan EMIs are calculated using a very easy formula.

E = P x r x (1+r)n / (1+r) n-1 

Where,

E = EMI amount

P = Principal amount

r = Rate of interest at which you will be borrowing the loan

n = tenure of the loan over which you will be repaying the loan.

Bank offered Financial Products 

BUSINESS LOAN

CAR LOAN

COMMERCIAL LOAN 

EDUCATION LOAN

GOLD LOAN

HOLIDAY LOAN 

HOME LOAN 

LOAN AGAINST PROPERTIES 

LOAN AGAINST SECURITIES

PERSONAL LOAN

PROFESSIONAL LOAN

TWO WHEELER LOAN

FAQ's On Business Loan 

1. What is a business loan?

A business loan is an unsecured form of credit designed to cover various expenditures in a business. Borrowers need not mortgage any asset to avail funds.

2. How much processing fee is charged by business loan?

The processing fee charged by business loans is upto 2.50% of the loan amount.

3. What is the minimum and maximum tenure period of business loan?

The minimum tenure period is 1 year and maximum tenure is 10 years.

4. How to get a business loan?

You can get a business loan from the lending institution of your choice in a number of ways, depending upon your convenience and the options offered by your lender.

  • Visit a nearby branch

  • Apply online via the lender’s website

  • Talk on call with the lender’s relationship managers

  • Send an email to your lender’s customer support mail address

  • Use the lender’s 24x7 virtual assistant feature

5. How much loan amount is charged by business loan?

The loan amount charged by business loan is minimum Rs.50000 to Maximum Rs.50 lakh.

6. How much interest rate charges are applied by business loan?

Interest rate charges are applied by business loan is 10% to 12%.

7. Can I get a business loan without any collateral?

Yes, you can get a business loan without any collateral or security. 

8. What is the maximum age the applicant is required to get a business loan?

The maximum age of the applicant is required to get a business loan is 75 years.

9. Who can get a business loan?

Entities, self-employed non-professionals, and self-employed professionals can apply for a Business Loan, after fulfilling the required eligibility criteria.

10. For what purposes can I avail a business loan?

You can apply for a business loan for any of the following or related purposes-

  • Small business finance

  • Working Capital finance

  • Home renovation

  • Business expansion finance

11. Can I avail a loan if I have a low credit score?

Yes you can avail a loan at any credit score but it inadvertently increases the interest rates. It is advisable that you should improve your credit score and then apply.

12. What is the minimum CIBIL score to get a business loan?

To avail a business loan, one must ideally have a CIBIL score of 700 or above. The same is true for both self-employed professionals such as doctors and engineers as well as self-employed non-professionals such as suppliers or manufacturers.

Last Updated on : 23/Nov/2020

Know More About

Business Loans

You're eligible for a Business Loans if you:


Are legally adult enough to handle it


Have still got it


Get a regular pay check


Make more than a basic buck

Your eligibility depends on:


Earn more than minimum income required


Maximum allowed Business Loans is Rs. 10K to Rs. 45 lakhs


EMIs of other loans loweryour eligibility

Boost your eligibility by:


Pay off your credit card bills


Choose longer tenure loan up to 5 years

Nothing gets done without that paperwork (which we'll happily carry over to the bank for you, no sweat). Here's what you'll need:

  • 1. Photo ID and age proof
  • 2. Signed application form with photograph
  • 3. Residence proof
  • 4. Last 6 months bank statement
  • 5. Documentation for salaried applicants:
    • Last 3 months salary - slips
    • Form 16 or Income Tax Returns
  • 6. Documentation for self-employed applicants:
    • Last 3 years Income Tax Returns with computation of Income
    • Last 3 years CA Certified / Audited Balance Sheet and Profit & Loss Account

Business Loans Interest Rates

Updated on 25 Nov 2017

Business Loans Details
Interest Rate (Monthly reducing balance) 15.65% - 21.2%
Processing Fees Varies with bank
Loan Tenure 1 year to 5 years
Pre-closure Charges Varies with bank
Guarantor Requirement Varies with bank

Business Loans EMI Calculator

Loan Amount

|
1L
|
50L
|
100L
|
150L
|
2Cr

Interest Rate

%
|
5
|
10
|
12.5
|
17.5

Loan Tenure

|
1
|
10
|
20
|
25
|
0
|
120
|
240
|
300


Your Monthly Loan EMI


₹24,959