A business loan is an unsecured loan for both new and existing businesses. You can use a business loan in any situation, whether it’s for expansion, real estate investment, employment, or debt repayment. Currently, there are many banks and financial institutions in the market where you can apply for a business loan at a low interest rate. 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 picture of the benefits and characteristics of a small business loan –
- Availability – business loans are commercially available for all types of businesses. Generally, high value companies get loans of up to Rs 75 at low interest which is great for short, long term or medium term financing.
- Flexibility – one of the main advantages 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 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 after the application is accepted.
- Incentives – Customized incentive and reward programs make the overall lending experience even better for borrowers.
Business loan conditions
If you want to get a small business loan, you must first check if you meet the eligibility criteria set forth by the company. The criteria for applying for a business loan vary among lenders, but generally the key points included in the eligibility criteria are:
- Applicants must be of Indian descent
- The applicant must be a self-employed person
- The minimum and maximum age of the applicant must be 25 and 65 respectively.
- The applicant’s ITR (minimum annual income) must be ₹1.5 lakh.
- Applicants must have at least 3 years of experience in their current job or 5 years as an entrepreneur (in the case of a former business).
- Business entities such as partnerships, limited liability companies, and limited liability companies can also apply for a business loan.
Necessary documents when applying for a business loan
Documentation plays an important role in the application process for any type of loan. If you want to apply for a business loan, you must have the necessary documents on hand to avoid any hassle. The documentation process for a small business loan varies from lender to lender, but generally the following documents are required:
- Proof of Identity – Aadhaar Card/PAN Card/Passport/Driver’s License/Voter Card. 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 proprietor’s statement (in the case of a sole proprietorship)
- Notarized copy of Partnership Agreement (for partnerships)
- Sample ITR of 2 years ago, income statement, balance sheet, profit and loss, etc.
How to Apply for a Business Loan.
The small business loan application process is simple and quick. It is designed to facilitate applicants with a quick and simple process. Here is a step-by-step guide you can follow to apply for a business loan –
- The first and most important step to taking advantage of a business loan is to look for different loan options offered by different lenders and compare them to find the best deal.
- Once you have selected your bank/lender, go through all the terms and conditions set forth by the bank regarding business loans.
- Visit the official portal of your chosen lender and fill out the business loan application form.
- The screen will show a list of all the types of business loans offered by that bank. Browse through these options and choose a loan type.
- After selecting the loan type, you will be redirected to a page where you have to fill in the details related to the loan such as the amount requested for the loan, repayment period, interest rate, etc.
- After filling in the details, submit the form along with the required documents.
- After you apply for a business loan, your form will be submitted for review. If your request is approved, the loan amount will be disbursed within a few hours.
Things to keep in mind when applying for a business loan
- Make sure you have prepared all the required documents before starting the application process.
- Make sure you only choose a lender after comparing all possible loan offers.
- Make sure you estimate the loan amount in advance to avoid wasting capital in the future.
- Be sure to read all the terms and conditions associated with a business loan before starting the application process.
- Make sure to estimate the EMI amount and see if it fits your budget.
Frequently asked questions
What is the interest rate on a business loan?
Interest rates for a business loan vary between banks and plan programs. Usually 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 can I get in a business loan?
The minimum and maximum amount that can be sanctioned for a business loan is INR 25,000 and INR 75 lakh respectively.
Is a business loan a good source of capital for the company?
Well, a business loan is a good source of capital financing for any company. This is because a business loan is more affordable and has better leverage.
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Source: tiengtrunghaato.edu.vn