Entrepreneurs often need credit to expand or finance their business for multiple reasons. They may need the funds to buy some equipment, the working capital gap, pay creditors, pay business fees, pay employee wages, expand, etc. Entrepreneurs cannot put their savings funds online. That is why they opt for business loans. The business loan works as the perfect financial aid for such situations. Obtaining a business loan is always a safe and easy way to address your business-related financial needs. You can also apply for a business loan if you want to start a new business. The terms and conditions to make use of a loan of this type are different from the loan taken for companies that are already in operation. Every business is different in several respects, requiring different documents and applying different criteria. That is why banks and NBFCs offer custom business loan plans based on applicants' requirements. These plans are applicant-centered and are developed with financial alternatives in mind. Banks and NBFCs also offer special loans for women entrepreneurs. They are personalized business loan plans for women to meet their needs and give them the opportunity to build a competitive business in the market.

Why should you take a Business Loan ?

Business loan for working capital

Even in an ongoing business, businessmen require an ample amount of funds to sustain and fund their daily operations. These loans help them to be sustainable soon and it can be paid off once the business starts to grow. This type of loan comes handy in a situation when the business earnings are not adequate.

Business loan for business expansion

Every entrepreneur wants his or her business to flourish beyond the boundaries of its local position. This thought comes to their mind when the business starts to grow in its initial location and there is a positive flow of profit. Businessmen understand the need and urge to expand their product i.e. the very own business. But expanding the business beyond local capacities is not easy, financially speaking. It surely needs a strong monetary backing to meet with the needs of expanding the business. Whether its location, equipment, new recruitments or paying for the new communication channel, businessmen need a bucket full of finance. Thus they opt for a business expansion loan. By taking this loan, businessmen make sure that their respective business touches new heights of success.

Business loan for buying machinery or equipment

Almost all types of businesses need specific machinery or equipment for smooth functioning. Many times these types of equipment are higher in price. Thus businessmen opt for this type of loan to buy such equipment and pay it off with profits which will come from the use of this equipment or by putting them out on lease later.

Business loan for developing infrastructure

Having a well built exquisite infrastructure is one of the key points of a business. Your clients many times judge you from the infrastructure you work within. Also, it is easier for many businesses to have a well-sorted customized infrastructure for smooth day to day affairs. Having any kind of infrastructure, small or large, does not come in cheap. Thus businessmen opt for this type of loan.

What are the Features and Benefits of a Business Loan ?

  • You can avail of this loan to tackle your immediate financial requirements like daily capital needs.
  • Business loans can also help in tax benefits for the company.
  • You don't have to put anything as collateral or need a guarantee for a business loan up to Rs. 75,00,000.
  • Banks offer customized repayment schemes for business loans. You can repay the business loan Daily, Weekly or fortnightly.
  • You don't need to show Income Tax Return for a loan up to 10,00,000.
  • A business loan offers you a lower interest rate compared to personal loans.
  • You can avail of a business loan ranging anywhere between Rs.50,000 to Rs. 75,00,000.

What are the different types of Business Loan in India ?

Business loans by government

The government of India helps various small businesses by offering them business loans under various schemes. One such scheme is Micro Units Development and Refinance Agency Ltd, also known as 'Pradhan Mantri MUDRA Yojana'. It was started with one goal: fulfilling all the funding needs of non-cooperative small businesses. Through this scheme, loans are sanctioned to the elderly and minorities, for factory their business needs.

Micro business loans

This is a type of small business loan which gives you a smaller repayment term. The maximum repayment term for microloans is 6 years.

Business loans for self employed professionals

This is a type of unsecured loan which is given to self-employed professionals. The loan amount varies from Rs. 25,000 to Rs. 75,00,000. The amount depends on the applicant's financial status and history. Self-employed professionals include CA, CS, doctor, engineer, architect, trader, commission agent, & contractors.

Business loan to finance equipment

Almost all types of businesses need specific machinery or equipment for smooth functioning. Many times these types of equipment are higher in price. Thus businessmen opt for this type of loan to buy such types of equipment and pay it off with profits which will come from the use of these types of equipment or by putting them out on lease later.

Business loan to finance a project

This type of loan is given for a long term specific business project. The company has to present a project assessment report on which the loan is granted.

What are the Eligibility Criteria to Apply For Business Loan ?

  • Banks have divided applicants into two categories based on their profession. The eligibility criteria and list of documents change as according to these two categories
  • Self Employed Professionals (SEP): Doctors, CA, CS, architects, engineers, etc.
  • Self Employed Non-Professionals (SENP): Trader, commission agent, contractor, etc.
  • Also, if you are applying as a company, you can avail loan by applying under the following entities:
  • 1. Partnerships/Proprietorship Firm
  • 2. Limited Liability Partnerships
  • 3. Private Limited Companies
  • Other important requirements to avail Business Loan:
  • 1. The minimum turnover of your business should be Rs. 60,00,000. The turnover should be in positive track.
  • 2. You should have a minimum of 3 years' experience in current business and 5 years of experience in the overall business industry.
  • 3. Your business must be making a profit for the last 2 years.
  • 4. The age of the applicant should be a minimum of 25 years and a maximum of 65 years. You should have paid your business Income Tax Returns for the last 2 years.
  • 5. You should have paid your business's Income Tax Returns for the last 2 years.
  • 6. The borrowers should have a strong credit history. They should have a credit report ready for bank reviewing.

What are the Documents required to Apply For Business Loan ?

  • 1. Neatly signed and filled Business Loan application form.
  • 2. Passport-size photographs.
  • 3. Identity and signature proof - Passport, Pan card, Driving License, Voter ID card, Aadhar card, employee identity card in case of government employees.
  • 4. Address Proof - Bank statement, Rent Agreement, Voter ID card, Ration card, Passport, Driving License, telephone/electricity/water/credit card bill or Property tax.
  • 5. Age Proof - Voter ID card, Secondary school leaving certificate (class 10), birth certificate, Passport, Aadhar Card, pension payment order or receipt of LIC policy.
  • 6. PAN card requirement for Companies/Firm/Individuals.
  • 7. Copy of details of all existing loans.
  • 8. Bank statements of last 6 months from application date.
  • 9. Business proof (registration of business).
  • 10. Copy of ITR/Assessment Orders of 3 years.
  • 11. Copy of challans proving that Advance Income Tax has been paid.
  • 12. Balance sheet and Profit & Loss details of business from last 2 years. These details should be certified by CA.
  • 13. Proof of continuation which will include ITR, trade license, establishment and sales tax certificate.

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