Borrowing money is never a good option. This is a general perception, especially with we Indians. However, this is not always true, and in a business context, it can’t be ever true. As an owner of any business, you will require a business loan sooner or later.
As any business whether small or big need funds to leverage their business requirements. In order to manage the business processes operating smoothly, they need to depend on funds from external sources. External sources such as the Non-Banking Financial Companies (NBFCs) and banks.
The knowledge of the importance of business loans is very crucial for the prosperity of any business. As business owners, you need to address all the accurate moves and choose judiciously to avail the business loan.
Any business entity or owner can apply for a business loan. However, before you apply for a business loan, you need to understand the basic purpose of this loan and how you intend to utilize it.
What things to estimate before applying for a business loan
To be eligible for a business loan in India, these are some of the important points that you need to consider first.
- You need to be minimum of 25 years of age and maximum 65 years
- Your business should be registered
- Your business should have been making the profit for 3 consecutive financial years
- Turnover should be on a positive trend
- The balance sheet has to be audited by a registered chartered accountant
- Loan availed should be on the existing business
Applying for a business loan has its own advantages
The following are some of the main advantages to any business. Whether you are the SME or you are running your business in the proprietorship capacity, a business loan is helpful.
- You can use the funds for any immediate requirement you may face including your daily capital needs.
- Unlike investments from private equity firms or entities, there is no need for profit sharing
- Business loans can also help in tax benefits for the company
- You also have the option of opting for Flexi EMIs, where you can control the outflow of repayment
- For all customers, some financial institutions offer pre-approved loans for the business finance needs
- Some institutions also do not require any collateral or guarantee for business loans for up to INR 50 Lacs
What are the business loan interest rates and the maximum amount of loan you can take?
Every NBFC and banks have their own interest rate slabs for business loans. For example, in the case of Tata Capital, which is one of the NBFC, you can apply for a minimum loan of INR 3 Lacs. The maximum amount you can apply for is INR 50 Lacs. This limit is for the business loan without any collateral or guarantee. They charge the interest rates in between 19% to 23%. This largely depends on the business requirement.
Even they offer a fixed interest rate business loan as well. Other kinds of their business loans include Flexi EMI, where you get to choose how much EMI you wish to repay per month, depending on your monthly cash flow. You can choose from:
- Step Up Flexi EMI plan: You have the option of upgrading your fixed monthly EMI, every year under this plan
- Step Down Flexi EMI Plan: With this option, you have the choice to start at a higher EMI and gradually, year on year, bring your monthly payment down.
- Bullet Flexi EMI Plan: This option allows you to pre-pay your loan in specific intervals.
What documents you need to keep ready to avail a business loan
Here’s a list of the basic documentation you will need to submit to the NBFC or the bank, from where you need the loan.
- Application form
- Company bank statements for six months
- Income Tax Returns for the last 2 years
- Audited balance sheet and profit & loss account for the last 2 years
- KYC documents of the company including PAN Card, Registration of Incorporation, Partnership deed, Memorandum & Articles of Association.
- KYC documents of the owners, partners, shareholders
- A report as to how the business loan intends to be utilized
- Certified copy of bank statements for the last six months
Finding the best business loan for your business?
The type of funding you receive for your business should always be based on your business needs. For instance, you should never plan to take a long-term loan if your business requires only a small amount of short-term funding. In a similar way, you must always avoid to take out multiple small business loans for purchasing any larger items like property or costly tools.
If you need quick access to capital for your business, Moneydial is here to help you. With our expert business loan advisers, you can apply and qualify within no time. So if you need to apply for a business loan for your business growth, come to us. We can help you with that. At Moneydial we always assure you with a trusted business loan advisers near you and that too for free.