Business requirements are different depending on the size of business, type of business and duration since it has been started. Business loan is an amount offered to meet the objectives or immediate requirements of a business. This loan is given understanding the customer requirements, therefore, it is a customized deal between a lender and a borrower that is decided looking at the borrower’s need.
Business loans are subject to easy availability and can be availed by anyone but make sure YOU NEED IT ! It is offered on minimum initiation charges and is usually an unsecured loan but there are some terms and conditions at the time of agreement that you need to abide with in order to get a smooth processing and a comfortable experience.
When do you need Business loans?
Business loans are needed in certain situations. One is at the time of starting a new business. If you plan to establish a new business wherein you don’t wish to invest much, the preferable option is to take up a loan that can be paid once the business sets a complete rotation of capital. Business loans can also be availed in case you decide to expand an ongoing business and you are short of liquid funds.
Business loans are also taken to increase work capital since it is a large capital offered in short span of time. It becomes easier with business loans to maintain liquidity of funds as well as meet business objectives.
Sometimes, an individual opts for this loan to upgrade their services in terms of new technology, machinery or renovation of the existing ones.
The loan is available to the self-employed set of people that include chartered accountants, doctors, architects, etc. those who have been practicing their profession and also have their qualification proof.
Self-employed non-professionals that can be traders and manufacturers are also eligible to get a business loan. Even private limited companies, business in partnership have the option to avail this loan when in need.
There are certain requirements listed below that define your eligibility.
Age: minimum 21 years
Age of current business: At least 3 years
Business profit: 2 lakh profit for 2 years
Business turnover: Up to 50 lakh
Business experience: 5 years or more
ITR: last 3 years
- PAN card of the firm or individual
- ID proof Aadhar, voter ID, passport, driving license, etc.
- Address proof passport, driving license, ration card, passport, aadhar card, etc.
- Account statement (last 6 months)
- Proof of business
- Permission to practice certificate
- ITR along with balance sheet, income details, profit and loss account
- Partnership deed
- Know about business loans
Interest rate: Interest rates on business loan vary from bank to bank however the general rates range from 15% to 25 % or more along with a standard processing fee charged by the bank.
Security: Business loans do not keep any collateral or security. They do not also require a guarantor, however, a background check and thorough check of documents are carried out.
Flexible loan option: Some banks offer flexible loan where you need to pay interest only on the amount used and that amount is also converted into easy EMIs that can be paid easily.
Amount: Business loans offer an ample amount to cater to your business needs. Amount up to 30 lakhs or more is offered as business loan amount that can be used to renovate your office, increase cash flow, upgrade technology, add new members to the team, etc.
Business loan approval: Loan approvals are highly dependent on the age of business, credibility and credit score. It is important to have a decent repayment history where a bank doesn’t have any reason to even doubt before giving a loan. Since start-ups don’t have much of recognition in the market, it gets difficult for a bank to trust and offer loans, however, several banks provide the facility.
Another factor that makes it doubtful to get the loan sanctioned is if you have too many loans already ongoing. The bank feels that it might be difficult for you to make the repayments since you are already doing it for so many other investments.
Types of Business Loans
- Term Loan
This is a standard type of loan that offers an amount that you can use in your business for capital gains. This type of loan is offered for a fixed duration and the amount is higher depending on the age of the business firm against which you have applied for the loan. The interest rate can be lowered provided the organisation is old and reputed. This loan usually expects collateral if it is a secured loan however unsecured loans are also offered where no collateral is needed.
- Working Capital
As the name suggests, this loan is taken to run the daily operations at a business organisation. It is usually availed by the borrowers when they are running out of cash due to offseason. This offer is best suited to traders, manufacturers, retailers in export/import business.
This loan is offered for a tenure of a year on an interest rate varying from 10-17%. The maximum amount is 30 lakh that is subject to renewal.
- Machinery Financing
These types of loans are availed by the individuals who have a lot of machinery dependent work. Since an up gradation is required on the equipment or machinery used with the changing times and the cost of it is too high, therefore, this loan is taken by such people. This loan extends its limit in crores. The time duration is fixed for such loans and lasts up to 5 years, the equipment serves as a collateral along with some security and interest rate offered are usually lower.
- Loan on Billing
This is a facility where you get the cash back on the billing you provide before the actual processing of your bills. You get almost 80% of your amount is paid in advance and rest remains due till the processing of the bills. A small amount is deducted as processing fee and interest rate.
- Business Loan for Women
There are several loan schemes with lower interest rates available for women to support their business requirements. Taking loans is not getting trapped it’s an assistance at the time of need to make you feel at ease. Choose your offers wisely, read the agreement thoroughly and make the repayments timely to lead a hassle-free life.