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.
Features of Business Loan
- Business loans are easy to avail and involve minimal paperwork.
- Business loans have flexible repayment options.
- You can avail a business loan in India in the range of Rs.50, 000 up to Rs.75 lakh. These loans are approved quickly without any hassles.
- Additional services like SMS, web chat, phone banking and so on are provided with business loans.
- Business loans have flexible repayment options.
- There are various types of business loans which can be availed based on the nature of the requirement. Few examples are loans for working capital needs, cash flow, and business expansion and so on.
- Business loans are usually repaid by the business entity and not the business owner. In the event of a bankruptcy, the business is liquidated and the proceeds are used to repay business loans. The owner is not held personally liable for the loss.
- Unsecured business loans are available for needs like business expansion, working capital requirements, and so on.
- Lenders usually don’t expect collateral, guarantors or security from business loan applicants.
- There are some banks which offer customers, business loans in a minute. Such speedy approval helps customers procure funds without wasting much time with approval and processing of funds.
- Business owners have a variety of business loans to choose from, depending on their fund requirements. You may choose from short-term, mid-term and long-term loans for the business.
- Borrowers are offered different repayment options. Business owners may choose to repay as per the business cash flows, they may increase or decrease EMIs or choose bullet repayments.
- Business loans allow you to purchase, lease and repair plant and machinery.
- Facilities technology up gradation and R&D.
- Funds, raw material purchase.
- 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 lakh.
- 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 lakh for a loan of INR 15 lakh and at least INR 3 lakh for a loan above INR 15 lakh. You need to have a minimum Cibil score of at least 700.
- 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.
Benefits of Business Loan
Why avail Business Loan?
Money for business
All you have to do is show your health insurance card at the hospital. You get free treatment, at any of the network hospitals under the health plan.
The health insurance plan offers you health insurance across your lifetime, as long as you pay the health insurance premiums.
All kinds of business
Health insurance plans offer first time buyers, the option to enter health insurance plans, even at 65 years of age.
Premiums on health plan, tax deductible up to INR 25,000 a year. If you are under 60 years. If you are over 60 years, it is INR 30,000.
What is Business/Commercial Loan?
The main aim of a commercial loan is to help traders, businessman and professionals, start or expand their commercial activities. Such loans can be secured or unsecured. Loan amounts ranging from Rs. 5, 00,000 to Rs.1, 00, 00,000. The tenure of repayment can be up to 10 years.
Secured business loan: secured business loans means that the entrepreneur keeps something as collateral against the loan amount taken. Collateral can be anything from raw material to finished products, land and building of the business to plant and machinery. If you have the collateral for the cash advance, you can have the money at relatively cheap rates and with much more flexible repayment options.
Unsecured business loan: unsecured business loan, as the name explains is a type of loan that doesn’t require collateral. It is typically at a higher rate of interest and is taken for a comparatively smaller tenure.