A business loan is a type of financing provided by financial institutions to help businesses fulfill their day-to-day needs. Individuals, MSMEs, and a variety of other entities can apply for a business loan. Applicants who own a home, a store, an office, or a go down have a better chance of getting a loan since banks consider them to be more reliable in terms of repaying loans on time. To obtain an unsecured business loan, most banks do not demand the submission of any collateral or security.
Interest Rates on Business Loans from the Best
Banks and NBFCs The interest rate on a business loan starts at 14.99 percent and rises depending on the applicant’s qualifications:
|Interest Rate (p.a.)
|Kotak Mahindra Bank
|PaySense Services India Pvt. Ltd.
|Tata Capital Finance
|IDFC First Bank
|HDB Financial Services Ltd.
The Importance of a CIBIL Score in Obtaining a Business Loan
- A credit score, also known as a CIBIL score, is a three-digit numerical representation of an applicant’s creditworthiness, as well as his or her repayment history and ability to repay.
- The CIBIL score, which is computed based on payback history, runs from 300 to 900. Banks and NBFCs consider any score above 700 to be appropriate for granting business loans at competitive interest rates.
- In order to receive financial benefits, applicants with no credit history or a low CIBIL score should maintain a good CIBIL score.
- Increasing your CIBIL/credit score does not happen quickly; it takes anywhere from 3-6 months. As a result, begin improving your credit score as soon as possible.
- Applicants can check their CIBIL score for free and apply for the best business loan online based on their business needs at Afinoz.com.
Criteria for Business Loan Eligibility
- The minimum age is 18 years old, while the maximum age is 65 years old.
- An applicant with an excellent credit score and no previous loan defaults.
- Existing businesses must have a minimum annual turnover of Rs. 10 lakhs.
- The following entities are eligible for a business loan:
- Individuals Entrepreneurial Ventures MSMEs (micro, small, and medium-sized enterprises) include artisans, retailers, manufacturers, and traders.
- Limited Liability Corporations (LLCs) both private and public Limited Liability Corporations (LLCs) Firms that are sole proprietorships, partnerships, limited liability partnerships, and large corporations that are only involved in manufacturing, trading, or services.
- Non-Governmental Organizations, Cooperative Societies, and Trusts CAs, Doctors, and Architects are examples of self-employed persons or professionals.
Required Documents for a Business Loan
- Basic KYC paperwork (PAN, Address proof), Bank Statements, and company documents are required for business loan applications. For your convenience, I’ve included a list.
- Valid Identity Proof, such as a PAN card or a driver’s license, Valid Address Proof, such as a utility bill or a passport, and Bank Statements.
- ITR or GST
- Proofs of income
- Evidence of the Company’s Existence (like Certificate of Incorporation, etc.)
Types of Business Loans
Short-term loans, long-term loans, and other small business loans are all examples of term loans. The loan amount granted under a term loan is determined by the applicant’s profile and business needs and can be repaid in EMIs over a period of 12 to 5 years. Unsecured business loans and secured business loans are the two types of term loans. Secured loans require the submission of collateral to the banks, whilst unsecured business loans do not.
A loan for working capital
Working capital loans are used to satisfy the day-to-day business needs or to manage the cash flow of a business. The working capital loan can be used for a variety of things, including business expansion, the purchase of equipment or machinery, the purchase of raw materials or items, the payment of salaries or rent, the expansion of inventories, and so on.
Discounting on bills (invoices)
Banks and non-bank financial institutions (NBFCs) offer invoice discounting as a financial product. Bill discounting is a method of obtaining working capital for a credit-worthy seller. It is a discount given to a seller’s consumer by a financial institution. The buyer has the option of purchasing products from the vendor if the payment is completed by letter of credit. Bills of exchange are bills that are subject to bill discounting.
Letter of Credit
A letter of credit is a payment instrument that is mostly used in international trade, in which a bank gives a monetary guarantee to businesses that deal in the import and export of goods. Businesses doing business internationally must deal with unknown suppliers and must have a guarantee of payment before proceeding with any transaction. As a result, a letter of credit is necessary to ensure payment to suppliers or exporters.
POS (Point of Sale) Loan
A loan is a sort of funding in which merchants provide financial help to their consumers at the time of purchase. Loans against POS machines can be used by business owners, enterprises, MSMEs, entrepreneurs, and retailers to start a new business or run an existing one. The amount of a POS Loan, also known as a Merchant Cash Advance, is determined by the amount of business volume generated by POS terminals.
An overdraft occurs when a person withdraws money from a current or savings account when the account balance is zero. If the overdraft amount is within the boundaries of a previous agreement, an agreed rate of interest will be applied. The interest rate is only applied to the portion of the total withdrawal limit that has been used.
Lastly, the term best business loan online is subjective as it varies based on a borrower’s requirements. However, Afinoz can help you get the best business loan online at low charges.