For all the entrepreneurs who have the vision to start/expand the small business to medium business or to run an existing business, one needs funds. Apart from the personal source, banks also help in providing funds. This arrangement is business loan. These business loans will be designed as per the trading/ business needs of the customers. Business Loans are provided for all the legitimate business purposes across the geography.
Business Loan can be both secured or unsecured loan. The secured business loan generally carries a lesser rate of interest as it is secured by collateral. Overdraft facility is an unsecured loan which is provided for the working capital requirements. Most of the business loan is a loan without security that can be repaid over an agreed time frame along with interest.
Not all the Banks & NFBCs provide business loans for the varied purposes of the business. For availing the business, careful selection of the right vendor is required to aid the business need.
Business Loan Eligibility
A business which is yielding a profit and has the best source to repay the debt can avail a business loan for expansion, diversification,
- Valid Business Registration Certificate which contains the details like Nature of the business, Address of the business, type of the business like proprietorship, partnership, Pvt Ltd or Public Ltd.,
- Valid VAT Registraton and VAT return for assessing the turnover of the business.
- Profit and Loss statement duly signed by a Chartered Accountant, to assess the profit of the business.
- Business Profile, which has the brief highlights of the business, potential clients, growth prospects with all precise details of the business.
- Cash Flow and Funds Flow, Statement of the business.
- Duly acknowledge Income Tax Return, to assess the track record of the business.
The above are the major focusing points which decides the eligibility of the Business Loan.
Evidential Support for obtaining Business Loan.
- Age of the applicant should be above 21 years and below 60 years.
- Identification Proof. (Registration Certification/Incorporation of the Company)
- Proof of Registered Office.
- Passport Sized Photographs of all applicants/co-applicants.
- Evidence showing continuity of business.
- Bank statement for the past six months.
- Acknowledge Income Tax return & statement of computation of Income.
- Audited & certified copies of Profit/Loss Statement for the past two years.
- Ownership proof of residence or business premises.
- If the Co-applicants are there, ITR for the past 2 years.
- Proforma Invoice, if the loan is for purchasing equipments.
- Professional Qualification Certificate if the loan is taken for professional service.
These are the main documents which are required for availing the Business Loan, apart from these if the financial institution /banks can ask any specific document depending on the type of the loan.
Different Types of Business Loan.
- Cash Credit/Overdraft for meeting working capital requirement of the business.This is against the security of stock,debtors or other liquid assets.
- Bills Disounting for finance against bills of the reputed buyers.
- Loans for Project Finance for the large work orders.
- Bank Guarantees for meeting business performance and financial obligations.
- To purchase commercial assets like machineries and expansion needs Term Loan is offered.
- Letter of Credit which guarantees the payment for goods and services when the seller provides acceptable documentation.
- MSE Loans designed to meet the Micro and small business enterprises, these are provided without collateral up to 10 lacs and with collateral as the loan amount increases.
- State Bank of India gives an added advantage, for those eligible under the SME, Collteral Free Loan will be covered under CGTMSE, which is The Credit Guarantee Fund Trust for Micro and Small Enterprises.
Interest Rate for the Business Loan
Rate of Interest is based on the Base rate of each Bank and subject to fulfillment of the eligibility criteria. Adding to this, for all collateral secured loans, the rate of interest will be generally low compared with the collateral free loans.
- Interest rates are based on the different loan slabs/ grids of the banks.
- There are discounts which are offered for higher loan amounts from time to time.
- Discounts are also offered for certain tenure.
Business Loan Interest & Charges
|Interest Rate Range||16.25 % to 19.40%|
|Loan Processing Charge||With Minimum amount being Rs.1,000/- to the Maximum of Rs.75,000/- which is 2.5% of the loan amount.|
|Prepayment||No Pre-payment permitted until repayment of 6 months EMI.|
Just after the higher education if we get a job, it is welcomed with open arms in our society. Whereas if a person has the vision to start a business, then facilities are not much. In order to unleash this potential Government / Banks / Private Financial Institutions is provided with various business loan options.
Financial assistance provided by the various Government Schemes, supported by the various public sector Banks, for these schemes Rate of Interest is lower than the Micro Finance Institutions.
Of late, there are many of the Micro Finance Institutions which have come up in our country which provide some of the unique services which normally are not provided by the scheduled banks.
- Quick & Hassle Free Finance, like an online application and sending the relevant documents through the email.
- Customized & flexible financial solutions to meet the individual needs of the customers. After careful consideration of performance and expansion plans. This way customers will have an edge over the professional services.
- Doorstep services for collecting the documents and once the loan are approved the same will be notified to the customers and proceed with the further steps.
- Most of the Private Banks will have Relationship Managers, these managers will have continuous contact with the customers to understand the immediate and future financial needs.