Business Loan

What is a Business Loan?

A business loan is financial assistance provided by the banks and NBFCs to meet the needs of the growing business. All types of businesses such as sole proprietorships, partnership firms, privately held companies, retailers, and self-employed individuals can avail these loans. Regardless of whether you are planning to expand your business or start a new venture, the banks will come to your rescue. Several financial institutions offer loans to start a new business. The banks and other financial institutions offer term loans and Flexi loans to suit the needs of the borrower. A bank business loan is offered up to Rs. 50 lakhs. However, credit history plays a crucial role in availing new business loans. A decent credit score makes the processing apart from attracting a better rate of interest. 

Types of Business Loans

Here’s all about 7 different types of business loans: 

1. Term Loan: A term loan is availed generally for capital expenditure. This loan could be a secured or unsecured loan. The unsecured term loan ranges for a period of 1-5 years whereas the secured business loan is for 15-20 years.
2. Start-Up Loan: As the name suggests, a start-up loan is generally offered for new business ventures. There must be an established business and the applicant must submit proof of the business existence and registration. This loan can be easily availed as they are provided without any security or collateral. The other striking feature of a start-up loan is that if there’s a loan default, the company can be liquidated to repay the dues. 
3. Working Capital Loan: It’s majorly taken to meet the day-to-day operations of the running business. It helps in balancing the cash flow that’s required to run a business. A working capital loan is mostly opted for by manufacturers, wholesalers, service providers, retailers, and export and import traders.
4. Loan against Property for SME: These loans are given to businesses whose loan requirement is more than 50 lakhs. The applicant has to mortgage the property to avail this loan. The loan can go up to 70% of the current market value of the property. The loan tenure is up to 15 - 20 years based on the policies set by the financial lending institution.
5. Invoice Financing: This type of financing is especially for small businesses that face a gap between raising invoices and receiving payment from the clients. The invoice financing can go up to 80% of the invoice amount. The debt is cleared once the business receives the payment.
6. Equipment Financing: This loan is exclusively for manufacturing businesses as they would recurrently need equipment and machines. Usually, heavy machines are expensive and to purchase this equipment, heavy investment is required. The interest rates are lower for equipment financing when compared to term loans.
7. Business Loan for Women: There are exclusive business loans for women to encourage them to start new businesses. The Government of India also has initiatives to support women in small and medium-sized businesses. Women can avail of flexible loans, start-up loans, discounts on the standard interest rates, and a faster loan process. 

Features and Benefits

Features of best business loans: 

Fixed Interest rate: The interest on business loans are fixed, usually between 14-24% a year. As the interest rate is constant throughout the year, the borrower can plan investment and business operations wisely. 

Flexible Repayment Tenure:  It is an attractive feature that helps businessmen to plan the repayment tenure based on his/her financial conditions.  

Collateral free loans: One can avail best business loans without any security or collateral loans. You do not have to pledge any asset to get a start-up business loan. 

Loan Amount: An individual can avail maximum loan of up to 50 lakhs.  

Minimal Paperwork: An individual can also apply for online business loans by visiting the respective website. It requires minimal paperwork. 

Benefits Of Business Loans: 

• Business loans can be availed for all business needs such as managing operations, working capital requirements, expanding a business and so on.
• A borrower can opt for business loans without pledging any assets. 
• The business loan process is very simple and can be applied online too.

Business Loan Eligibility Criteria

• The private business loans can be applied by manufacturers, service providers, self-employed, private limited companies and so on. 
• The applicant must be between 21 years to 65 years.
• The applicant must have been in business for the last 3 years.
• The profit must be a minimum of 2 lakhs or annual business turnover must be Rs 50 lakhs.
• The applicant must have filed IT returns for the last 3 years to avail of a business loan.

Business Loan Fees & Interest Rates 

The current rate of interest on business loans starts at 14.00% and processing fees is mostly 2% to 3% on loans. However, this varies from bank to bank. Check the business loan fees and interest rates with the financial institution before applying for a business loan.

Documents Required for Loan Application 

Here’s a list of general documents required for business loans:

• Proof of business
• IT return statement of last 3 years
• Bank account statement of last 6 months
• KYC documents of co-applicant
• Residential proof
• Identity cards such as PAN card, Voter card & Aadhar card
• Proof of ownership of possessions uses in business

Why Should you choose the Av Finserv For Apply Business Loan 

Av Finserv is India’s leading financial market service place that has helped individuals to avail business loans. You can submit your documents online and opt for a hassle-free loan process. With over 20 years of service and having served 10,000 plus customers, Av Finserv helps in managing finances. Now, you can easily apply for small business loans, private business loans, personal business loans, car loans, home loans, mortgage loans and medical loans.