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What is Business loan?
Business loans are unsecured loans in India offered by banks and non banking financial companies to expand business, start new businesses and meet their goals and immediate needs. Most of the banks and financial institutions provide the term loan and MSME loans to meet the company’s needs. MSME loans are micro small & medium enterprise loan. These loans are provided to sole proprietors, partnerships firms, private limited companies and shopkeepers etc.
Types Of Business Loans For Startup And Existing Business
Term Loan
Term loans are loans in which the client has to repay the loan amount in a set of time periods given by the banks, Term loans are divided into two types short-term loans and long-term loans in most cases the repayment tenure will be 12 months to 10 years, the repayment tenure will be decided by the borrower at the time of loan application.
Startup loan
Startup business loans are provided for emerging businesses for their expanding business in their starting stage of operations to improve the infrastructure and production needs.
A business loan from the government is like Pradana Mantri mudra Yojana, Credit guarantee trust funds for micro and small enterprises etc…Working Capital Loan
Working capital loans are micro business loans used for their daily requirement in a business firm, by this, they can balance the daily business requirement. These loans are mainly availed by the producers, merchants, service providers, distributors & traders.
Invoice Financing
This is a form of loan mostly availed by the small business when a company struggles to raise the invoice & receive payments, The banks provide loans against the invoice of business. Bank makes an agreement with the borrower to clear the loan amount when the payment is received.
OD Facility
This is the loan provided by banks to clients where they can withdraw the loan amount as per their requirement, the interest rate charged only on the loan amount used by the borrower. In this, he can withdraw the loan amount if has a zero balance in his bank account.
Equipment Or Machinery Loan
This is the loan that is provided to buy new machinery & equipment by the bank and the borrower. This is mainly useful to those who are engaging in manufacturing. In this, they have tax benefits and the interest rate differs from lender to lender.
Business Loan From Government
The government of India has begun a different loan scheme for individuals, MSME loans for new businesses, women entrepreneurs & others who are engaged in trading, services, and manufacturing activities. The Government is providing business loans for women. The government of India has provided these schemes through the private banks, public sectors, and NBFCs, there are many schemes like PMMY, CGTMSE, startup India and standup India, etc….
Point Of Sale Loan
Point of sale loan or cash advance for merchants the amount made in advance to the supplier on daily debit and credit this included in the merchant cash advance. This is why it’s crucial to make sure the company has enough cash flow to cover the repayments. The amount that can be returned is significantly higher when a business is performing successfully.
How To Calculate Business Loan Interest Rate
Calculating the EMI manually Is a little bit of a difficult process. By calculating EMI we need to know the loan amount, the interest charged by the bank on the loan amount, and the tenure in which you want to borrow the amount. The formula for calculating this is mentioned below.
E= P*r*(1+r)^n / ((1+r)^n-1)
In the above Formula
E = EMI amount
P = Principal amount
r = Rate of interest
n = tenure of loan repayments in months
Use The EMI Calculator For Accurate And Quick Estimate….
Features Of Business Loans
- Lower Your EMI
Due to increased competition among banks, business loan interest rates are currently quite low, allowing you to take out a loan without worrying about hefty repayments. - Quick Disbursal
A business loan has the extra benefit of having loans disbursed fast when you need money for your company’s demands. Loan disbursal was done in a matter of days with the option of applying online and few documents needed. For a selected group of clients and a loan amount up to a predetermined amount, some lenders may also provide instant business loans. You won’t have to stop operating your firm due to a shortage of funding. - Pre-approved loan offers
Some banks and NBFCs provide pre-approved loans to their existing customers. Customers need not have to go through the loan process and can avail loan and get the amount disbursed in the account in no time. - Higher Loan value
Banks provide the higher value loan amount to their customer as their requirement according to the documents they have submitted to the bank that differ from business to business. - Longer Repayment Tenure
Customers can get affordable Emi’s on their loans and they can have a longer repayment tenure of the loan based on the loan amount taken - Minimal Documentation
Business loans have the advantage of not requiring a lot of paperwork to apply for them. In fact, some customers can obtain loans to cover all of their needs, from expansion to working capital requirements, without providing any collateral, guarantors, or security. Some banks will also offer doorstep services.
Eligibility Criteria For Existing business & New business loans
- Nationality
The nationality should be Indian while the applying loan - Cibil Score
The Cibil score is important for applying loan that should be 650 & above - Age
The age criteria in a business loan have to be 24 to 72 years, and at the time of loan maturity, the age should be 72years. - Business vintage
Business vintage has to be for a business loan is 3 years - Work status
Work status is to be self-employed.
Documentation For Availing The Business Loan
- KYC Document
KYC documents like Adhaar, Pan, Voter Id, or any other government-approved document - Address Proof
For address proof, the customer can provide the electricity bill rental agreement or any government issued ID. - Financial Documents
Applying for a business loan they have to provide GST returns, bank account statements, and other financial documents. - Business Ownership Proof
This is the registration document of the business.
How To Apply For Business Loan In CreditsIn
- It only takes a few minutes for applying for a business loan
- Just click on apply online and download the creditsin app
- Register with creditsin
- Share your basic information and submit.
- Our team will reach out to you for the further loan process
Frequently Asked Questions (FAQ’S)
What is a business loan?
A business loan is an unsecured, one to three-year loan provided by banks, NBFCs, or peer-to-peer lending platforms without the need for any security, guarantor, or asset hypothecation. This sort of financing is available to organizations including sole proprietorships, partnerships, private limited companies, and public limited companies. A business loan can be used whatever the borrower chooses, including for working capital, short-term cash flow needs, investments in equipment and other plant and machinery, etc.
What documents are required to apply for a business loan?
- KYC documents of business like PAN Card, Partnership deed, Registration of Incorporation
- KYC documents of the business proprietor
- Firm bank statements for the last 6 months
- Balance sheet of the company and Profit & Loss accounts for the company
- Income Tax Returns fillings for the last 2 years
- GST returns filing for the last Six months
- The Customer has to show how the loan is used in detail
Who Can Avail The Business Loans?
Banks and NBFCs normally offer loans to self-employed who are running the business firms like Sole Proprietorship, Partnership Firm, and Private Limited Companies etc
What is the repayment option for the business loans?
The Customer can repay their loan amount through Electronic clearance service [ECS], Post dated Cheque & direct deduction.
What Is The Minimum Cibil Score For Business Loan?
Cibil score has to be 650 and above for availing of a business loan.
What is the maximum business loan amount that can be availed?
Customers can avail of loan amounts up to 75lakhs through banks, it depends on credit score.
Conclusion
In conclusion, a lot of organizations use bank loans as a sensible component of their overall financial plan. In practice, it seems that established and growing businesses have easier access to bank financing than startups. As a result, we are aware that business loans provide several advantages to business owners, including flexibility, retained earnings, tax advantages, and more. Choose wisely when you’re availing of the business loan which suits your business, Apply business loan for startup and existing business with creditsin
