Business Loan

Comprehensive Guide to Business Loans in India

A business loan is a financial product offered by banks, NBFCs, and other financial institutions to meet the funding needs of individuals, entrepreneurs, self-employed professionals, startups, MSMEs, and larger business entities. These loans can be categorised into Secured Loans, which require collateral, and Unsecured Loans, which do not require any security or collateral.

Types of Business Loans Available:

Financial institutions offer a variety of secured and unsecured loans tailored to meet different business requirements. These include:

1. Term Loans: Available as short-term, intermediate-term, or long-term loans, repayable over 12 months to 5 years, based on business needs.
2. Working Capital Loans: Used for day-to-day operations, such as purchasing raw materials, paying salaries, or managing cash flow.
3. Overdraft Facility: Allows businesses to withdraw more than their account balance, with interest charged only on the utilised amount.
4. Invoice Discounting: Enables businesses to access funds by discounting their accounts receivable.
5. Letter of Credit (LC): Guarantees payments for import/export transactions.
6. Point-of-Sale (POS) Loans/Merchant Cash Advance: Offered to businesses based on sales generated through POS terminals.
7. Equipment and Machinery Loans: Financing specifically for purchasing machinery or equipment.
8. Loans under Government Schemes: Include Mudra Loans (PMMY), PMEGP, CGTMSE, Stand-Up India, PSB Loans in 59 minutes, and others.

Business Loan Interest Rates (as of January 2023)

Interest rates vary by lender, applicant profile, and loan type. Here's a comparison of rates from leading institutions:

Note: Interest rates are subject to change and depend on the lender’s terms.

Eligibility Criteria

To qualify for a business loan, applicants generally need to meet the following criteria:

• Business Tenure: Minimum 1 year.
• Credit Score: 750 or above.
• Annual Turnover: Varies by lender.
• No History of Loan Defaults.

Eligible Entities

• Sole Proprietors, Partnerships, LLPs, Private and Public Limited Companies.
• Start-ups, MSMEs, Traders, Manufacturers, Service Providers.
• NGOs, Co-operative Societies, Trusts, etc.

Required Documents

Applicants need to submit the following:

• Completed loan application form with photographs.
• KYC documents: PAN card, Aadhaar card, passport, etc.
• Bank statements for the last year.
• Proof of business incorporation.
• Any additional documents requested by the lender.

How to Apply for a Business Loan Online

Follow these simple steps to apply:

1. Fill in the online application form and agree to the terms.
2. Provide your business and personal details, including mobile number and email.
3. A bank representative will contact you to process the application.
4. Upon approval and document verification, the loan amount will be disbursed.

Business loans, available in both secured and unsecured forms, cater to diverse business needs. Whether for starting a new venture, expanding operations, or managing daily cash flow, financial institutions offer tailored solutions to empower businesses across sectors.