As we know there are various types of business loans offered by different banks. If you are starting a business then, you may apply for any of these loans like startup business loans, overdrafts, working capital loans, term loans, and professional loans.
In such a case, the business needs the capital intensive, the stage of development, in terms of inception, growth, or maturity for applying the business loans for your requirements.
Type of business loans available in India
Usually, businesses need funds in the growth stage which is also stabilized in a mature business with depreciated capital and working capital needs. Thus, there are various types of business loans mentioned as:
♦ Start-up loan:
A start-up loan is generally applied by new business users. The applicants for such loans have the eligibility criteria for applying the same. The lenders will ask for the borrower’s personal credit profile along with the company name and information, as well as the time period when they start their business. The users must have eligibility on the loan amount, tenure, and interest rate applicable. On the other hand, if you are applying for the start-up business loan then, your business should be established and the applicant must submit proof of the business existence and registration.
The overdraft loan usually helps with some collateral or securities which are in terms of bank fixed deposits. In the case of an overdraft, the bank offers loans depending upon your credit history, cash flows, tenure of banking relationship, and the repayment history of your business. It is also based on the limit where the overdraft amount can be utilized and the interest charged on it.
♦ Working capital loan:
The working capital loans are mainly provided to the businesses as regular working capital. This loan has no collateral and has low-interest rates than an overdraft. In this type of loan, the interest rate is charged by the bank on the utilized amount, not on the entire sanctioned amount. In this case, most banks take full control of monitoring the business with its debtors, receivables, cash flow, inventory, and some other features.
♦ Term loans:
Term loans are the standard type of loan that can be used for both personal and business purposes. The amount in a term loan is disbursed and the EMI is based on a specific pre-defined tenure period. Term loans can also be taken as foreign currency and thus, it is also known as Foreign Currency Loans. In Foreign Currency Loan, firstly the loan amount is calculated in USD, converted into INR, and then, paid to the business running in India. It is paid as INR and then set off against USD payments received by your business.
♦ Professional loans:
Professional loans are one, that are applied by self-employed professionals such as doctors, chartered accountants, and lawyers based on the user’s credit history. It also varies from bank to bank, which helps to know the individual’s particular amount of loans. One can apply for this loan if-mortgage of non-agricultural land, National savings certificates, government bonds, bank’s term deposits, and assignment of Life Insurance Policies etc. The tenure of the loan is starting from 5 years to 7 years.
Compare the best business loan interest rates 2020
Here is the list of best banks, business loans interest rates, and processing fee, when you are applying for a business loan from any of these banks listed below:
|Bank||Business loan interest rates||Processing fee|
|State Bank of India||11.20%||Starting from 2% to 3%|
|HDFC Bank||15.65%||Starting from 0.99% to 2.50%|
|ICICI Bank||16.49%||Starting from 0.99% to 2%|
|Tata Capital Business loan||21.00%||Starting from 1.50% to 2.50%|
|Bajaj Finserv||18.00%||The maximum charge is up to 2%|
|IndusInd Bank||14.00%||The maximum charge is up to 2.50%|
|RBL Bank business loan||16.25%||Starting from 1.80% up to 2.20%|
|Fullerton India||20.00%||Up to 2%|
Eligibility for Business loan
Banks are mostly preferring multiple factors to calculate the eligible loan amount of the borrowers applying for the business loan. Here are some following factors that give an estimate of your loan amount and the best interest rate offers.
|Particulars||Business loan eligibility criteria|
|Professionals & Self-employed||⮚ Self-employed non-professionals- Sole proprietors, partnership firms, private limited companies, public limited companies which are involved in the business of manufacturing, trading, and services.
⮚ Self-employed professionals- Doctors, CA, CS, and architects.
|Age||Borrowers should have an age limit starting from 21 years up to 65 years.
|Loan amount||Individuals can apply for the loan amount of Rs. 50,000 up to Rs. 100 crores.
|Interest rate||The interest rate for the loan amount is starting from 13.50% up to 24.00%.
|Loan tenure||The loan tenure is up to 5 years
|Employment||⮚ For self-employed professionals- 3 years
⮚ For self-employed businessmen- 5 years
|Banking stability||Individuals must have banking stability of a minimum value 6 months and above.
|CIBIL score||The points of CIBIL score must be 650 or above.
Documents required for a business loan
If you are applying for a business loan then, you should submit the documents as follow:
⮚ The application form must be signed by the borrowers who are applying for the loan.
⮚ You should submit your PAN card as identity proof.
⮚ Individuals must submit residential address proof.
⮚ Submit the last 3 years ITR (either self-employed or business), profit & loss account, and balance sheet.
⮚ Submit the last 12 months of bank account statement.
⮚ If you are doing your business then, submit a certificate and proof of business existence.
⮚ Submit your business profile.
⮚ Borrowers should submit their office address like ownership/ lease/ rent agreement/ utility bill.
If you are selecting a business loan based on your profile and requirement then, the above-mentioned information will help you as a business owner. The entire information will help you to decide the type of financing best suited for your venture. Thus, the above-mentioned business loan offers different types of business loans in India which are collateral-free or unsecured business loans for small businesses up to Rs. 50 lakhs are available with flexible repayment tenure starting from 12 months to 60 months. You can choose and select any type of business loan mentioned above and start your business accordingly.