What is Business Loan?
Business loans are unsecured financial assistance provided by banks and NBFCs in India. The primary aim of these is to support the urgent needs of your growing business. Most financial institutions offer term loans and flexi loans to cater to the business needs of a company. Business loans are also called commercial loans. All types of businesses such as a sole proprietorship, privately held company, partnership firms, self-employed individuals and retailers can avail these loans.
Foremost, a business loan interest rate remains fixed throughout the tenure. However, depending on the profile of the borrower, a lender may also offer a floating rate of interest, in which case the interest rate will vary through the tenure of the loan. Typically, rates vary between 11%- 19% (subject to change).
It is also possible to avail business loans even if you have a bad credit rating. A borrower can leverage the application through the status of the revenues, type of business and the assets of the company. In case the assets of the company are more valuable than the loan, banks will not shy away from sanctioning it.
The repayment tenure of the loan is between 1 to 5 years and depends on the ability to repay.
Who can get a Business Loan?
- Limited or Private Limited Company
Net income of the concern should be more than ₹150,000 per annum for business loan up to ₹1,500,000 and over ₹300,000 for business loan above ₹1,500,000.
- Partnership or Proprietorship Firm
A minimum of 25% stake each can be clubbed to the income of the concern
- Chartered Accountant / Self Employed Professional
Who possess diploma or degree in any of these discipline like art / craft /profession or Who possess the skill that is considered as a profession from banks perspective shall be considered for any financial assistance. For example: Dental Surgeons, Accountants, Medical Practitioners, Engineers, Craftsmen, Management consultants, Construction contractors etc.
- Age Limit: The applicant should be min 21 years & max. 65 years.
- Income: Business should be profit making at least for the past 2 years.
- Turnover: ₹150,000 p.a. should be the minimum annual income.
Documents needed to apply for a Business Loan
- Application Form: Complete loan application form with one passport size photograph
- Valid Proof of Applicant’s Identity: Passport, Photo PAN card, Voter’s identity card , Driving license and MAPIN card
- Proof of Residence: Ration card/Telephone Bill/ Lease agreement/ Electricity Bill/ Passport/Trade license /Sales Tax certificate
- Proof of Age: Passport, Photo PAN card, Voter’s identity card
Financial Documents: Copies of IT returns for the last two years along with the latest Bank statements for 6 months and P & L and balance sheet for last two years audited by a C.A.
- Self Employed (Private Ltd. Co. and Partnership Firms): P & L Copies of IT returns for the last two years and P & L and balance sheet for last two years audited by a chartered accountant.
- Self Employed Individuals – Professionals: Copies of IT returns for the last two years and Bank statements for last 6 months and – Professionals: P & L and balance sheet for last two years audited by a chartered accountant
- Self Employed Individuals – Non Professionals: P & L and balance sheet for last two years audited by a chartered accountant and Copies of IT returns for the last two years and Bank statements
- Business Ownership[ Proof: Other Mandatory Documents such as Sole Proprietorship Declaration, Certified true copy of Memorandum & Articles of Association