Business Loan

Business loans are the primary financial commodity used by individuals and companies to start a business, revamp existing businesses, and for expansion purposes.

Business loans are provided to meet the requirements of working capital, purchase equipment or machinery, boost business cash flow, and much more.

With loan amounts starting from Rs. 10,000 and reaching Rs. 50 crore (secured loan), companies, and businesses have several options for flexible and tailored repayment options for financing.

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Business Loan's Top Features:

  • Interest rate: from 13% onwards
  • Loan nature: short-term and long-term, working capital, secured loan and unsecured loan
  • Min. loan Volume: Rs. 10,000
  • Max. loan amount: up to Rs. 50 crore, as per company requirements, will exceed
  • Repayment period: 12 months minimum and up to 5 years maximum.
  • Collateral: Not needed for business loans that are unsecured
  • Check and compare, at reasonable interest rates, the available business loan options.

Business Loan Rates

The interest rate on business loans begins from 13 percent onwards, which also depends on the applicant’s eligibility:

Bank/NBFC/Fintech Interest Rate (p.a.)
Bajaj Finserv
18% onwards
Capital First Prime
21% onwards
Fullerton Finance
17% onwards
FlexiLoans
18% onwards
HDB Financial Services Ltd.
18% onwards
HDFC Bank
13% onwards
Hero FinCorp
18% onwards
ICICI Bank
13% onwards
IIFL Finance
18% onwards
Indifi Finance
18% onwards
Kotak Mahindra Bank
16% onwards
Lendingkart Finance
18% onwards
NeoGrowth Finance
21% onwards
PaySense Services India Pvt. Ltd.
18% onwards
RBL Bank
18% onwards

Note: The interest rates, fees, and charges listed above are subject to change and depend on the sole discretion of the bank, NBFC, and RBI.

Documents required for business loan

Application form:

The application form properly completed with all the information needed

Photographs of passport size

Passport size photo required of the applicant and all co-applicants

KYC documents

As specified in compliance with RBI guidelines

Identity Proof

Voter ID Card, Driving License, Passport, PAN Card

Evidence of Age

PAN I d, Passport, Voter ID card

Address Proof

Passport, Voter ID, Sales Tax Certificate, Energy Bills (Telephone, Electricity)

Business address evidence

contract of lease, ownership or rent, evidence of business life

Eligibility Criteria For applying Business Loan

The business loan eligibility conditions are listed below:

  1. Age Requirements: Minimum 18 years at the time of loan application & 65 years at the time of loan maturity 
  2. Indian Citizen without a criminal record 
  3. An applicant with good credit score and no previous credit defaults, if any 
  4. Fees & Charges, Profits, Business Turnover, Operating History, Business Vintage, Credit score, and Profitability requirements are specified by the respective financial institution

Entities that can avail business loan:

  1. Individuals
  2. Startup Enterprises
  3. MSMEs
  4. Artisans, Merchants, Distributors, and Traders
  5. Private and Public Limited Companies
  6. Closely Owned Limited Companies
  7. Sole Proprietorship Companies, Partnerships, Limited Liability Partnerships and Large Enterprises working exclusively in the sectors of Manufacturing, Shipping or Services
  8. NGOs, Co-operative Societies and Trusts
  9. Self-employed people / professionals-CAs, surgeons, engineers, secretaries of businesses, allopathic doctors, designers, etc.

Some Detailed Information about Document Required

  1. IT returns last 2 years'
  2. Bank Statement for the last 6 months
  3. Benefit and Loss Statement of the last 2 years
  4. Balance sheet of the last 2 years audited by CA
  5. Challans GST
  6. Reports from the tax audit
  7. License to Trade

* Loan records, if any

Proof of Private Limited Company or Partnership Business identity

Service tax, IT return, sales tax, VAT, Shops and Establishment Act registration certificate, Memorandum of Articles (MoA) and Articles of Association (AoA), city tax bill, etc., certified copy of partnership deed.

Proof of identification, PAN card, IT return, water and electricity bill in the name of the question, Voter ID card, driving licence, sole proprietor's passport and PAN card

  1. Identity Proof- Individual
  2. Identity Proof -Sole Proprietorship
  3. IT returns last 3 years'
  4. Last 3 years' tax returns on revenue
  5. Bank Statement for the last 6 months

Categories of Business Loan

Business Loan Description
Discounting Bill
Discounting invoices is a financial instrument that is provided by banks and NBFCs. For the seller of goods on credit, bill discounting is a means of working capital financing. It is a discount that is obtained from the client of a vendor by a financial institution. The buyer has the option of purchasing goods from the seller by the payment being made by letter of credit. Bills that fall under bill discounting are referred to as 'exchange bills'.
Letter of credit
Letter of credit is a payment instrument used predominantly in foreign trade where the bank offers monetary guarantees to undertakings engaged in the importation and exportation of goods. The letter of credit is used for imports as well as for exports of goods. Overseas companies have to deal with unknown vendors and need payment guarantee before conducting any transaction. Therefore, it is necessary to provide payment guarantee to suppliers or exporters with a letter of credit.
Self-employed Entrepreneurs Loans
This is the most common category among all, as large numbers take up loans for self-employed entrepreneurs. The amount of the loan can vary from Rs . 50,000 being the minimum and can go up to 10 crore anywhere. The interest rate offered depends on the applicant 's financial background and is determined, at their discretion, by the lenders.
Loan MUDRA
(MUDRA) loan is a loan issued by most leading banks to micro, small and medium-sized enterprises (MSMEs) nationwide. Loans of at least Rs . 50,000 and at most Rs under the Pradhan Mantri MUDRA Yojana. To start an enterprise or a SME unit, 10 lakh is issued. Through the Mudra Loan Yojana, the government wants to ensure that first-time entrepreneurs or established business owners are provided with proper funding.
Loan Overdraft
An overdraft entails overdrawing cash from the current / savings account of others. An account holder takes out more money than has been deposited in the account, in simpler terms. If the overdrawn amount is below the limits of the previous arrangement, an accepted rate of interest will be paid.
PMMY
PMMY is a scheme initiated by the Government of India to provide non-farm small / micro businesses and non-corporate companies with funds of up to Rs. 10 lakh. The Mudra loan system is divided into three groups , called Shishu, Kishore & Tarun, in which private sector banks, public sector banks, regional rural banks (RRBs) etc. provide these loans.
Stand-up India
The Government of India has launched the Stand-Up India scheme to provide support for people in the SC / ST group and for women entrepreneurs. The primary objective of this scheme is to help banks provide loans to at least one SC / ST borrower between Rs . 10 lakh and Rs. 1 crore and at least one female entrepreneur per branch of the bank to enable them to set up their own company.
Term Loan
Many types of term loans, such as short-term loans, long-term loans and other small business loans, are currently available. These loans may be used by an entrepreneur according to his or her requirements and economic position. The period of the loan for a short-term loan is mainly 12 months and it goes up to 5 years for long-term loans. Term loans are split into two parts, unsecured business loans and secured business loans. The collateral or security may be a certain land, machinery or business area in secured loans and they will typically have lower interest rates compared to an unsecured one. Most business loans are unsecured loans and do not require the submission to banks or NBFCs of any collateral or protection.
Loan for Working Capital
Working capital loans are used to resolve companies' day-to-day financial needs. The regular spending of corporations includes the payment of wages, the procurement of raw materials, the payment of rent, training courses, etc.

Special Scheme & Offer for Women Entrepreneurs

Nowadays, banks are offering women entrepreneurs lucrative schemes. These loan schemes are for women only and offer relief in terms of interest and collateral costs. 

Some banks also have special divisions for female entrepreneurs, providing them with business consultancy, training and counselling, as well as avenues for selling and exhibiting their goods. The benefits of women ‘s special schemes are not eligible for women entrepreneurs whose ownership is less than 50 percent. Some of the popular loan schemes for women entrepreneurs are as follows:

  1. Mahila Udyam Nidhi Scheme
  2. Mahila Samridhi Yojana
  3. Cent Kalyani of Indian Central Bank
  4. Stree Shakti Package of Indian State Bank
  5. Shringaar and Annapurna of Bhartiya Mahila Bank
  6. Dena Shakti Scheme of Dena Bank
  7. Udyogini Scheme
  8. Dena Shakti Scheme of Dena Bank

Uses of Business Loan

Frequently Asked Question

Ans.  Yes, any person who is 18 years of age and above is eligible to apply for a business loan at the time of the loan application.

Ans. The minimum loan amount offered is Rs. 10,000 and, depending on the business conditions and the profile of the borrower, the maximum loan amount can exceed Rs. 50 crore.

Ans.  The permissible age for the use of a business loan is up to 65 years at the maturity of the loan.

Ans.  The interest rate provided by different banks and NBFCs begins at 13 percent.

Ans.  Depending on the respective bank or NBFC, you can repay the loan sum within a minimum of 12 months and a limit of up to 5 years.

Ans.  No, you are not expected to send any collateral to the bank or NBFC; collateral is expected for a few unique secured business loans.

Ans.  All the fees and costs vary from bank to bank for a business loan. There are different charges for every financial institution, so you need to search their official website online.

Answers: There are numerous forms of business loans provided by banks and NBFCs, including MSME loans, PMMY Mudra loans, secured and unsecured business loans, short-term and long-term loans, working capital loans, equipment finance, line of credit, equipment finance, bill discounting, building equipment loans, purchase loans for machinery and equipment,

Ans. Some common schemes include the PMMY MUDRA scheme,SIDBI loan, CGTMSE, PMEGP, Standup India, Startup India, psbloansin59minutes.com, NSIC, NABARD, etc.

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