- As the loan application process is online and needs minimal paperwork, eligible borrowers can get instant approval on short term business loan.
- Instant funding: The loan amount is disbursed promptly after the short and simple loan application process and instant approval.
- Easy availability: If a business is not eligible to get a long-term personal loan from traditional lenders, such businesses can apply for a short-term business loan to meet urgent business expenditures.
- Multipurpose loan: Short-term business loans can be used for a host of funding requirements of a business, such as working capital, daily operations and asset acquisition.
- Digital process: The procedure of applying for short-term business loans is entirely digital. The loan can be applied through apps and websites.
Key points to consider before applying for short-term business loans
Small business loans are the right options for entrepreneurs and MSMEs to start a new business or expand their business. The applicants must consider some important points in relation to short-term business loan application before applying for the loan to get good results.
- Check your eligibility for small loans
- Compare multiple lender’s rates and terms
- Keep the supporting documents ready
- Usually, short-term business loans can be availed for a short period only usually for 12 months
- Keep your business plan prepared
- Highlight the objectives and goals of your business
- Compute the credit you need to fund your business as precisely as possible
- Startup business should summarise the application of funds in its business plan
Who can get small business loans?
While the eligibility criteria may slightly vary from lender to lender, some common requirements you need to fulfil to get business small business /startup loan are as under:
- The borrowers must be an Indian citizen
- Age of the applicant should be at least 21 years old at the time of application while the maximum age should not be more than 65 years before the maturity of the loan.
- The applicant should be a venture or a convincing business plan
Documents required for short-term business loans
Although documentation varies from lender to lender, here is the list of basic documents required to get short-term business loans:
- Business documents
- Photographs: 2 passport size copies
- Proof of Identity: Passport/ Aadhaar Card/ Voter’s ID/ Driving License
- Address Proof: Passport/ Driving License/ Aadhaar Card/ Utility Bills (Postpaid Phone Bill/ Electricity Bill)
- PAN Card of the owner or venture
- Proof of Income: Bank Statement for the last 6 months
- Bank proof: Copy of the front page of your passbook/ cancelled/ scanned cheque
- Signature proof: PAN Card, Passport, Bank verified signature
- Proof of business continuation
- Additional documents:
- Declaration of the sole proprietorship
- For business in partnership: Partnership agreement /MOA, AOA and certified copy of Board resolution
- B/S, P&L a/c of partnership company for the past 2 years with all schedules validated by a Chartered Account in case income is earned from partnership firm
Short term business loan interest rate, loan amount, and repayment tenure and mode of repayment vary from one lender to another. For instance, ZipLoan offers small business loan up to Rs. 5 lakh for a flexible repayment tenure which ranges from 12 to 24 months. Whereas, Indifi offers a business loan up to Rs. 50 lakh at 1.5% per month interest rate for up to 36 months.
Startup loans offered under the Startup India Scheme are more flexible in terms of eligibility, loan amount and tenure.
Business startup loan scheme by the Government of India
The government of India launched multiple business loan schemes under the Startup India programme to encourage the young ambitious entrepreneurs. MSMEs (Micro, Small and Medium Enterprises) and entrepreneurs can raise funding for their business under these schemes.
Some of the small loan schemes offered by the Government of India are as under:
- Pradhan Mantri Mudra Yojana (PMMY)
- Bank Credit Facilitation Scheme
- Credit Guarantee Scheme (CGS)
- Stand-Up India Scheme
- Sustainable Finance Scheme
Short-term business loan interest rate may vary from lender to lender. Factors like the type of business, business plan and potential directly affect the business loan interest rate.
Read More: Private Sector Banks in India: Then and Now