Discover the entrepreneur in you with a business loan.
Your business requires working capital to run and function smoothly. Lack of funds may sabotage the ambitious growth plans of your Business. Banks give you money to run your business, which you have to repay with interest, called a business loan.
A business loan is a loan that is availed for purely business purposes. The principal amount along with interest is to be repaid according to the terms and conditions of the business loan.
There are different types of business loans like secured loans, unsecured loans, microloans and so on.
- Your business loan can be secured (you give a collateral) such as your Company inventory, land or machinery and avail your loan at a lower rate of interest.
- Your business loan can be unsecured (you do not need to give a collateral).You are charged a higher rate of interest.
Why avail Business Loan?
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Thinking of Availing a Business Loan
Steps to Get Business Loans
To get the best terms on business loans, jot down these steps:
- Step 1:
Business loan is a business too. Narrow down lenders after doing your research on them. It is always good to start by building good relations with the lender. Discuss what the company is all about. Build the trust factor.
- Step 2:
Decide what the money is needed for. Approach the lenders who grant the type of loan you seek. A loan may be required for many reasons like financing equipment, real estate, working capital needs and so on. In short, approach the right lender. Also decide where to avail the loan. This could be nationalized banks, commercial banks, private banks, financial institutions or NBFCs.
- Step 3:
Decide on the amount of loan you seek. Overestimating or underestimating the loan amount can be a problem. It is also good to have your research documented.
- Step 4:
Make sure you have a good Credit Score. Credit score decides the fate of your loan. A credit score of 700 is favorable and the business loan could be sanctioned.
- Step 5:
Arrange and acquire all the documents needed for a loan application. Documents required are a business plan, business owners resume and financial statements like Profit & Loss A/c, Balance Sheet and Cash Flow Statements, three years ITR and so on.
- Step 6:
Be prepared to pledge collateral. Some lenders may seek security to give loans.
- Step 7:
Understand terms and conditions of the loan as stated by the lenders. Analyze them based on your business and financial needs.
Documents Required To Avail a Business Loan
- You require to submit owner’s/business PAN card details.
- Your Residence and identity proof.
- Your 6 months bank statements.
- Your latest Income Tax Returns along with the computation of income, Balance sheet and Profit and Loss account for the last 2 years.
- Your proofs of the business such as trade licenses, sales tax certificates and so on.
Eligibility criteria to avail a Business Loan
- You need to be at least 21 years of age and 65 years when your loan matures.
- Your business needs to have a minimum turnover of INR 40 Lakhs.
- You need to have a minimum experience of 3 years in the current business and at least 5 years of total business experience.
- Your business should be making profits for at least 2 years.
- You need to have a minimum annual income of at least INR 1.5 Lakhs for a loan of INR 15 Lakhs and at least INR 3 Lakhs for a loan above INR 15 Lakhs.
- You need to have a minimum Cibil score of at least 700.