A business loan is an unsecured loan available to both new and existing businesses. You can use a business loan in all situations, whether it’s for expansion, real estate investment, employment, or debt repayment. Currently, there are various 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.
Main characteristics and benefits of a commercial 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:
- Available: Business loans are available in the market for all types of businesses. In general, high value companies get loans up to ₹75 Lakhs at low interest rates which are well suited for short, long or medium term financing.
- Flexible – One of the main advantages of a business loan is that you can withdraw the loan according to 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 The lender does not charge interest on the money withdrawn.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 application process 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 generally the main points included in the eligibility criteria are:
- The candidate must be of Indian origin.
- Applicant must be self-employed
- The minimum and maximum age of the applicant must be 25 and 65 years, respectively.
- The ITR (Minimum Annual Income) of the applicant should be ₹1.5 lakh.
- The candidate must have at least three years of experience in an existing job or five years as an entrepreneur (in the case of an old trade).
- Business entities such as partnerships, limited liability companies, and limited liability partnerships can also apply for a business loan.
Documents needed for a business loan
Documentation plays a key role in the application process for any type of loan. If you want to apply for a business loan, you should have the necessary documents on hand to avoid any kind of hassle. The documentation process for a small business loan varies from lender to lender, but the following documents are generally 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/utility bills/rental agreements. Any of the above documents can be used as proof of identity.
- Bank records and business reports for the last 6 months.
- Sole Proprietor Statement (in the case of a sole proprietorship)
- Certified copy of the Partnership Agreement (in the case of a partnership business)
- ITR form of 2 previous years, income calculation records, balance sheet, profit and loss, etc.
How to apply for a business loan.
The application process for a business loan is very simple and fast. It is designed to provide the applicant with a quick and easy process. Here is a step-by-step guide you can follow to apply for a business loan:
- The first and most important step in taking advantage of a business loan is to search for different loan options offered by different lenders and compare them to find the best deal.
- Once you’ve chosen your bank/lender, review all the terms and conditions set forth by the bank regarding business loans.
- Visit the official portal of the selected lender and fill out the application form for a business loan.
- The screen will display a list of all types of business loans offered by that bank. Browse through these options and choose the type of loan.
- After selecting the type of loan, you will be redirected to a page where you will need to fill in the details related to the loan, such as the requested loan amount, payment terms, interest rates, etc.
- After filling in the details, submit the form along with the required documents.
- After you apply for a business loan, your form is submitted for review. If your application is accepted, the loan amount will be disbursed within a few hours.
Things to consider when applying for a business loan
- Make sure you have prepared all the necessary documents before starting the application process.
- Be sure to choose a lender only after comparing all possible loan offers.
- Be sure to estimate the amount of the required loan in advance to avoid wasting capital in the future.
- Be sure to read all the terms and conditions associated with a business loan before beginning the application process.
- Be sure to estimate the amount of EMI and see if it fits your budget or not.
Frequently asked questions
What is the interest rate for a business loan?
The interest rate for a business loan varies from bank to bank and plan to plan. Typically, the interest rate starts at 12%.
Will I have to pay a business loan processing fee?
Yes, you will have to pay a business loan processing fee. The processing fee is typically 2-3% of the sanctioned loan amount.
What is the maximum repayment 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 is INR 25,000 and INR 75 lakh 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 a business loan is more affordable and has better leverage.
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Source: HIS Education