Business loan is a funding support offered by financial institutions to meet the day-to-day business requirements. Business loan can be availed by individuals, MSMEs and many other entities. Applicants who own house, shop, office and godown have more chances of loan approval, as banks consider them more reliable in repaying loans in time. Most of the banks do not require collateral or security to be submitted to avail unsecured business loan.The minimum loan amount offered starts from Rs. 30,000 and is usually offered by Non-Banking Financial Companies (NBFCs), Small Finance Banks (SFBs) or Micro Finance Institutions (MFIs), whereas applicants can avail collateral-free business loans maximum up to Rs. 1 crore. Small business loans are also available for MSMEs and startups.Business Loan Interest Rates from Top Banks/ NBFCs Business loan interest rate starts from 14.99% onwards which also depends on the eligibility of the applicant:

Business Loan Types

1. Term Loan

Term loan is offered under various types, such as short-term loan, long-term loan and other small business loans. The loan amount offered under term loan depends on the applicant’s profile and business requirements that can be repaid in 12 months to 5 years, in the form of EMIs. Term loans are divided into two parts, unsecured business loans and secured business loans. Secured loans require collateral to be submitted with the banks, which is not in the case with unsecured business loans.

2. Working Capital Loan

Working capital loans are availed to meet the day-to-day business requirements or to manage business cash flow. The working capital loan can be availed for various other purposes, such as business expansion, buying equipment or machinery, purchasing raw material or goods, paying-off salaries or rent, enhancing inventory and much more.

3. Bill (Invoice)

Discounting Invoice discounting is a financial instrument offered by banks and NBFCs. Bill discounting is a source of working capital finance for the seller of goods on credit. It is a discount which a financial institution takes from a seller’s customer. Through the payment being made by letter of credit, the buyer has the option of buying goods from the seller. Bills that come under bill discounting are termed as ‘bills of exchange’.

4. Letter of Credit

Letter of credit is a payment instrument used mainly in international trade in which the bank provides monetary guarantee to enterprises which deal in import and export of goods. Enterprises doing businesses overseas have to deal with unknown suppliers and they require assurance of payment before performing any transaction. Therefore, a letter of credit is important to provide payment assurance to the suppliers or exporters.

5. Point of Sale (POS)

LoanPoint of Sale Loan is a type of funding wherein merchants offer their customers some financial assistance at point of their purchase. Business owners, enterprises, MSMEs, entrepreneurs, retailers can avail Loan against POS machines to start a new business or to manage their existing businesses. POS Loan is also termed as Merchant Cash Advance in which the loan amount depends on business volume generated via POS terminals.

6. Overdraft Loan

An overdraft means overdrawing money from ones’ current/savings account even if the account balance is zero. An agreed rate of interest will be charged, if the overdrawn amount is within the limits of a preceding agreement. The interest rate is charged only on the utilized amount of the total withdrawal limit.

Special Schemes for Women Entrepreneurs

Nowadays, banks are giving attractive schemes to women entrepreneurs. These business financing schemes are exclusively for women and it gives them relief in terms of interest rates and collateral. Some of the banks also have special departments for women entrepreneurs where they provide them business consulting, training and counseling along with avenues for marketing and showcasing of their products. Women entrepreneurs whose ownership is less than 50% in the company are not eligible to avail the benefits of the women’s special schemes.

Some of the popular loan schemes for women entrepreneurs are as follows:

• Mahila Udyam Nidhi Scheme
• Mahila Samridhi Yojana
• Cent Kalyani from Central Bank of India
• Stree Shakti Package from State Bank of India
• Shringaar and Annapurna from Bhartiya Mahila Bank
• Dena Shakti Scheme from Dena Bank
• Udyogini Scheme

Features of Business Loan

The following are the key features of the Business Loan:

Purpose

To meet the financial requirements of the business. It could be for the purchase of new plant and machinery, to replace the existing plant and machinery, building infrastructure, expanding the business, and so on, that is required to take the business to a greater level. Also, working capital finance is extended to provide for the day to day operational cost of the business.

Quantum

The quantum depends on the project for which the finance is required. The assessment is based on the vision of the business which is depicted in the projected financial statements for years up to which the repayment is fixed, the profile of the promoters, expected cash flow from the business which will give an insight as to the repayment capacity.

For projects where the loan required is above  2 Crores, the project appraisal will be done by a team of skilled persons from the Project Finance Department (PFD) of the bank/financial institution. Based on the viability report of the PFD and considering various other factors like the liquidity ratio, the DSCR, i.e., Debt Service Coverage Ratio, the Fixed Asset Ratio, etc., the quantum will be decided.

Interest

The rate of interest will vary from lender to lender and will be in the range between 11% p.a. to 20% p.a., depending on the loan quantum, the project for which the finance is sought, line of activity, the business sector, and the customer’s profile.

Security

The security depends on the quantum of loan and also the business sector. For a loan up to  2 Crores to MSME Sector, no collateral security is insisted. The loan will be covered by the Credit Guarantee Scheme. Normally the primary security will be by way of hypothecation of the stocks and receivables if the finance is for working capital and hypothecation of the assets created out of the bank finance if the loan is for capital investment. Collateral security by way of residential/commercial property will be required. The agricultural property will not be accepted unless the finance is for agricultural and allied activities.

Repayment

The working capital finance is short-term finance provided for a period of 6 to 12 months which will be renewed on an annual review. The repayment period for term loans ranges from 3 years to 8 years and even till 20 years if the construction of business premises is involved.

Processing fee

Processing fee also depends on the nature of the activity and the business sector but generally will range from 0.25% to 2% depending on the bank/financial institution.

Pre-payment charges

Some of the lenders do not collect any pre-payment charges while others charge 2% to 4% on the outstanding balance.

The following are the common eligibility criteria for a Business Loan:

• The applicant or the promoters of the business should be in the age group between 21 years to 65 years.
• Proprietorship/Partnership Firms and Pvt Ltd Companies, Self-employed individuals/professionals engaged either in Manufacturing, Services or Trading, are eligible for the loan.
• A business vintage of a minimum of 3 years with a minimum experience of 5 years in the line of activity will be required.
• A minimum business turnover and a minimum annual turnover as per the ITR will be required. The quantum of the requirement will vary from lender to lender.
• The firm/company should be profit-making for at least a period of 2 years

Benefits of availing a Business Loan

There are various benefits of availing a Business Loan in the present scenario. Some of them are as given below:

With the thrust on entrepreneurship, which leads to the generation of employment, there are various schemes that have been introduced for Business Loans. There are special schemes for the MSME Sector without collateral security. So even businessmen who were deprived of loans due to non-availability of collateral security can benefit now with the Business Loans.

The repayment period fixed for the term loan is very flexible and will be assessed based on the Debt Service Coverage Ratio (DSCR), which gives an insight to the repayment capacity of a particular business establishment. The tenure ranges from 3 years to 20 years, depending on the cash flow of the business establishment.

The rate of interest is comparatively low and is based on the credit score, credit rating, loan quantum, and the profile of the Company.

At present, you can apply for a Business Loan online. The eligibility check will be done and if you are eligible, you will be called to submit the required documents to the lender for further processing. Now, the process involved for a Business Loan is not as complex as it used to be. The banks/financial institutions will not insist for collateral or a third-party guarantee for loans up to  1 Crore for which guarantee cover under CGTMSE is available. Availability of this guarantee cover has reduced the risk factor for the lender to a certain extent.

Documents required for a Business Loan:

• Proof of address of the promoters

Aadhaar Card, Voter’s ID Card, Driving Licence, Utility Bills, etc.

• Photo ID proof of the promoters

PAN Card, Passport, Voter’s ID Card, Driving Licence, etc.

• Proof of business

GST Registration, Trade Licence, Registration under Shop Act, Drug Licence, etc.

• Income proof

Balance Sheet and Profit & Loss Account audited by an Auditor with Auditor’s report.

• Other documents
  • Partnership Deed in the case of Partnership Firm
  • Articles of Association, Memorandum of Association, and Board Resolution as per the format provided by the lender in the case of a Company.
  • PAN Card of Partnership Firm/Company
  • National and State Permit if finance is availed for a commercial vehicle.

How to Apply for Business Loan from Estabizz Fintech

Just Write to us we will call you for all the support from pick up of the documents to funding all this service will be at doorsteps.

Why choose us?

Our finance-based company is successfully operating in the industry for years. With a highly qualified and experienced team of financial advisors, we are one of the top leaders in the financial domain. We provide our expert assistance at every step of your loan journey to provide the best solution to our clients. Our professional and hassle-free loan services have helped many of our clients to fulfil their desires.

We are your trusted financial partners, driven to provide you with the best loan services to fulfil all your financial needs. Our customized loan service comes with a myriad of profitable features including hassle-free processes, instant e-approvals, guaranteed safety, lowest interest rates and many more.

• Seamless unsecured loan
• 100% Safe
• Lowest Interest Rate
• Easy and faster loan approvals
• Collateral-free loan
• Minimal Documentation
• Real-time customer support
• No extra money for Pre-closer

Get In Touch

Feel free to get in touch with us.

For More Details
Feel Free to Call
CS Devyani –
08069192000 , +91-9825600907

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