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Business Loans - A Gateway to Dream Business!

Updated on April 20, 2024 , 16504 views

With the growth of the financial Market, competitive businesses are emerging. In the current scenario, people are either looking for starting their own businesses or boost their existing business with terms of funding their working Capital or growth and expansion. In order to reach this goal, they require finance to sustain their vision. To help this need, various public and private sector banks have made the provision of loans for the purpose of expansion of business, fund the working capital, purchasing machinery, upgrading infrastructure, hiring staff and maintaining the business inventory.

Business Loans- A Guide

Business loans are a big help to those looking to finance their business requirements.

Features of Business Loans

Business loans come with certain terms and conditions that the applicant has to consider carefully before applying for the loan. The features are mentioned below:

1. Loan Amount

The loan amount offered differs from Bank to bank. Applicants can avail business loans of Rs. 2 crores and even more depending on the requirement of their business.

2. Credit Record

Financial institutions offer big loan amounts to applicants who have a proven record of financial credibility. The financial institution or bank will always check the eligibility of the applicant before lending the required amount. Various details like identity proof, business proof, Income details and other required documents will be required.

3. Interest Rate

The interest rates for business loans are mostly fixed. This means that the interest rate will be constant throughout the loan repayment tenure. The fixed interest rates for business loans start at 14.99% and can Range up to 48,% depending on the requirement and the bank/financial institution.

4. Loan Repayment Tenure

The loan repayment tenure ranges up to 5-7 years. This makes it easier for the applicant who also gets the option of loan pre-payment. The applicant can also repay the loan and foreclose it with some extra charges as defined by the specific bank and financial institution.

5. Collateral Free Loan

Business loans are usually unsecured loans. However, it also depends on the bank or financial institution. If the loan is an unsecured loan, it won’t require any Collateral. Few loans may require machinery, plant or raw material to be provided as collateral. The applicant may not require to put up an asset like a car or house as collateral for the loan.

Top 5 Business Loans from Banks

Some of the top banks in the country provide loans at good interest rates.

They are mentioned below:

Bank Loan Amount (INR) Interest Rate (% p.a.)
Bajaj Finserv Rs. 1 lakh to Rs. 30 lakhs 18% onwards
HDFC Bank Rs. 75,000 to Rs. 40 lakhs (upto Rs. 50 lakhs on select locations) 15.75% onwards
ICICI Bank Rs. 1 lakh to Rs. 40 lakhs 16.49% onwards For secured facilities: Up to Repo Rate +6.0 %(Non PSL) For facilities backed by CGTMSE: Up to Repo Rate + 7.10%
Kotak Mahindra Bank Up to 75 lakhs Starting 16.00%
Tata Capital Finance Up to 75 lakhs 19% onwards

Note: Interest rates are also subject to bank’s decisions based on the assessment of business, financials, loan amount and tenure of repayment by the applicant.

1. Bajaj Finserv

Bajaj Finserv small business loan is sought after by a number of applicants. It offers a business loan up to Rs. 30 lakhs. The repayment tenure for term loans ranges from between 12 months to 60 months. The interest rate for a business loan starts from 18%. p.a.

2. HDFC Bank Business Growth Loan

HDFC bank business loans are quite popular among the audience. The loan amount ranges from between Rs. 75,000 to Rs. 40 lakhs (Rs. 50 lakhs on select locations). The loan repayment is between 12 months to 48 months. The interest starts at 15.75% on existing loan transfer.

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3. ICICI Bank

ICICI bank offers business loans up to Rs. 2 crores. The interest rates for an ICICI Bank Business loan is subject to ICICI bank’s decisions based on the assessment of business, financial, loan amount and tenure.

4. Kotak Mahindra Bank

Kotak Mahindra Bank offers loan amount ranging from Rs. 3 lakhs to Rs. 75 lakhs. The repayment tenure goes up to 48 months. It offers collateral-free loans. The bank offers desired interest rates.

5. Tata Capital Finance

Tata Capital Finance offers unsecured business loan amounts up to Rs. 75 lakhs. Applicants get the option of choosing from flexible business loan repayment options. The interest rate starts from 19% p.a., onwards. However, the interest rates are also subject to loan eligibility, income, your business and other criteria.

Tata Capital determines the best interest rates for the applicant’s business loan requirement.

Documents Required for Business Loan

1. Identity Proof

  • PAN Card
  • Aadhar Card
  • Passport
  • Voter’s ID card
  • Driving License
  • Passport-size photos

2. Address Proof

  • Voter’s ID Card
  • Aadhar Card
  • Passport
  • Driving License
  • Utility Bill
  • Electricity Bill
  • Water Bill

3. Business Proof

  • Proof of Business existence for 3 years
  • Bank statement for last 6 months
  • Copy of Trade license
  • Partnership Deed’s certified copy
  • Business material ownership details and proof

4. Income Proof

4 Must-Knows of Business Loans

Business loans follow a very strict procedure. The applicant must be well-versed and ready with all the necessary documents in hand before applying for the business loan.

1. Business Plan

Financial institutions or banks will always require a written business plan before considering your request for the business loan. The applicant must remember that the business plan should be written well before presenting it to avail loan.

2. Credit Score

Before applying for a loan make sure to have a good Credit Score. The credit score should range at least between 650-900 points to get your loan approved. Repay any existing debts before applying for the loan.

3. Database

Before applying for a loan make sure to have the important documents and a database of your company’s financial situation along with the company’s past performance. The applicant should also present his/her cash flow statement.

4. Age Limit

Anyone ranging between the age of 18 years and 65 years can apply for a business loan. However, it is important to look for the age criteria the bank sets out. Some banks require applicants to be above 21 years or 25 years of age. Some banks even allow people to borrow money up to the age of 75.

Conclusion

Business loans are extremely beneficial to aid all business requirements. Make sure to read all scheme related documents carefully before applying for a loan. The loan requirements vary from bank to bank. Make sure to prepare a good business plan to present for loan sanction. If you are someone with no business experience and want to start a new business, make sure to pitch a great business plan along with the focus on your ideas and the presentation.

FAQs

1. Are there different types of business loans?

A: Yes, you can apply for long- or short-term business loans. Depending on the duration of repayment, your loan will be categorized as per tenure.

2. Do the interest rates of business loans vary?

A: No, the interest rate of business loans is fixed. In other words, you cannot take a business loan at floating rates like a Home Loan. The rate of interest can range anywhere from 14.99% to 48%. The interest rate will depend on the financial institute or bank from which you are taking the loan, the collaterals you are Offering, and other similar factors.

3. What are some of the eligibility criteria that I have to meet to get a business loan?

A: Business loans are disbursed at the discretion of banks or financial institution. However, there are some essential eligibility criteria that you will have to meet to get a business loan, and some of these are as follows:

  • You must be aged between 18 - 65 years to get the loan.
  • You must be a citizen of India with no criminal background.
  • You must have a Good Credit score.
  • You should not have defaulted on any previous loans.

If you fulfil the criteria mentioned above, it improves your chances of getting the loan.

4. What are the documents that I will need to provide to get the loan?

A: To get the loan, you will have to provide certain documents such as identity proof and address proof. These can be in the form of an Aadhar card, passport, driver's license and other similar documents. Other than these, the bank will require you to provide you income details such as six months’ salary slips, income certificate or ITR copies. The bank or financial institute disbursing the loan requires these documents to evaluate your credit score and financial condition.

5. Is there any collateral-free loan?

A: Yes, you can apply for a collateral-free business loan. This is in the form of an unsecured loan in which you do not need to provide collateral. However, it depends on the bank or the financial institute to accept your application for an unsecured loan.

6. What is the role of the business plan for the loan?

A: When you apply for a business loan, you must provide a business plan along with the application. This is necessary to convince the officer of the reason for taking the loan.

7. Is the age of the business important while applying for the loan?

A: Yes, your business should be at least two years old before you can apply for the loan. Therefore, the age of your enterprise should be mentioned when you apply for the loan.

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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