Running a business is never an easy task. One is bound to face financial hiccups during the process. Whether you are a new generation entrepreneur venturing into a new business or an established businessman planning for a business expansion, financial institutions offer the business loan to bail you out of the situation of such financial crunch.
Whether its money required for an immediate official expansion or it could be the time of recession, when payments don’t come on time but the expenditures can’t wait. The business loans ease your way through a scary road of financial crisis and open the world of new business heights for you. But running for business loans from pillar to pillar could be the most tiring job.
Business Loan Information & Eligibility
Capital is a vital component for the success of commerce today. Irrespective of whether a firm is in proprietorship or big organization, finance holds the key to its development, and managing finance is certainly not a child’s play. Keeping all this in mind, several institutions have come up with business loans to help budding and existing entrepreneurs.
Very frequently, every company has to face a make-or-break situation which calls for immediate investment to reap long term benefits. If one is not having the finances at that time, he might well opt for a business loan which is designed specifically to fulfill urgent business requirements. These loans not only help in expanding a business, but also play a vital role in modernizing and improving small as well as medium scale business.
Business loans are offered in two types:
For a Secured Business loan,
The borrower needs to pledge something as collateral or security against the loan amount taken. Be it raw material or finished products, land or machinery, anything can be kept as collateral in agreement with the lending party. The borrower can also offer cash advance as collateral as it offers more liquidity and the loan can be availed at lower interest rates and flexible repayment options.
For Unsecured business loans,
Here is no requirement of any collateral from the borrower. However, while availing an unsecured business loan, the borrower needs to pay a high interest rate. Moreover, the loan amount is taken for a smaller tenure when compared to a secured loan. According to their tenure, business loans can be further diversified.
Which Loan to take- Short or Intermediate or Long term one?
- To meet the temporary needs of a business like short term working capital, a short term loan is most apt one, with the repayment time period of a year.
- An Intermediate Loan is necessary for starting up business to buy inventory, equipment and also increase working capital.
- A Long term is necessary for well established business houses who wish to expand, increase their fixed assets or related business acquisitions, with terms that runs for a period of 3-5 years.
Furthermore, drawing the thin line between critical needs and expenses that can be put off till a better financial situation prevails holds the key to prevent one from any financial predicament. Making a single hasty decision without any idea of its impact in your business might prove to be detrimental in the long run. Therefore, one must be very clear of his actual need and necessities for enhancing and improving his business by borrowing the rights loans with a detailed insight of its pros and cons.
Hence, acquiring more capital in order to promote any business or consolidating old debts and credits, beckons the call for Business loans.
Sole proprietorship businesses, partnerships and private limited companies are eligible to apply for business loans.
The applicant must meet the below eligibility criteria’s
1. Minimum age – 21 years
2. Maximum age – 65 years
3. Minimum income (annual) – Rs 1, 50,000
4. Minimum loan amount – Rs 25000
5. Maximum loan amount – Rs 2, 00, 00,000
6. Minimum years of business Existence – Not applicable
7. Minimum loan tenure – 1 year
8. Maximum loan tenure – 4-5 years
1. PROOF OF IDENTITY (any one)
- Photo PAN Card
- Voter’s Card
- Driving License
2. PROOF OF AGE
3. PROOF OF SIGNATURE
- PAN Card
- Banker’s verification of signature
4. PROOF OF RESIDENCE (any one)
- Ration Card
- Utility Bill
- LIC Policy Receipt
- Rental Agreement
5. INCOME PROOF
- Latest 3 months Bank Statement from Operating Account
- Last 2 years ITR with computation of Income/Certified Financials
- Proof of Turnover (latest Sales/ Service Tax returns)
6. PROOF OF CONTINUITY CURRENT PROFESSION/BUSINESS (IT Returns / Certificate of business continuity issued by the bank).
7. SECURITY DOCUMENTS (Loan is available only against Collateral Securities)
- Mortgage of Immovable Property (Building and non-agricultural land) or National Savings Certificates, Government Bonds, Bank’s Term Deposits, Assignment of Life Insurance Policies standing in the name of borrower/ proprietor/partner/ director.
Certain FAQ’s regarding Business Loans:
Q1. What are the income requirements for taking business loans?
Ans. Many lenders require that the business concerns interested in availing business loans should have a minimum net income of Rs. 150,000 p.a. for loans upto 15 Lakhs. If the requirement is larger, the net income requirement also increases.
Q2. For what purposes business loans are given?
Ans. Business loans are sanctioned to supplement working capital requirements, short-term cash needs and business expansion plans. You can also acquire another business, new inventory, equipments, or any other business asset.
Q3. What are the main features of business loans?
Ans. • No security is required for loans upto 15 lakhs (conditions differ from lender to lender)
• No guarantee required
• Fast Loan Processing
• Minimum Documentation
Q4. In what form the business loans are available?
Ans. Business loans can be sanctioned for a fixed term or may involve a revolving line of credit or they may be in the form of an overdraft facility.
Q5. How I can get a business loan of 50 lakhs?
Ans. You will have to provide a security for taking large business loans. Most of the public sector and private sector banks offer these loans.
Q6. Are business loans available without any security?
Ans. Yes. You can apply for unsecured business loans to meet your short-term needs.
Q7. How much unsecured business loan can one get?
Ans. Different banks have set their own criteria for lending unsecured business loans. The maximum loan amount varies from bank to bank.
Q8. How should one apply for business loans? Is online application free of cost?
Ans. You can personally visit the banks or apply online. Online application form does not cost anything.