What is a Business loan?

In India starting a business is profitable along with more expenditure. Any businesses need an adequate amount of investment to fund expenditures related to the expansion of one’s business or adding a few more line of products to the existing product line or service. In such a condition, business loans will help the businessman as they provide much needed financial assistance to companies so that they can grow and stand out in the market. The business loan is a debt which the company is bound to pay back to the bank/ financial institutions within a specific tenure as per the terms and conditions mentioned in the loan agreement like any other loans. Start-up Business loans can be taken for a variety of necessary requirements like starting up a new business, expansion of the firm, dealer and vendor financing etc.

When it comes to India lenders often does not require any collateral and most of the banks sanction business loans with minimal pre-payment charges. In addition, there are special schemes available including Mudra scheme for smaller businesses, business loans for women, and small business loans for professionals. One more add-on benefit is that if the business owner fails to repay the loan, not only the business owner but the whole company will be liquidated in order to clear the business loan.

If any business owner needs to apply for a business loan and want a bank to consider their application, then it is necessary to meet the eligibility criteria of the bank. The specific criteria may differ from one lender to another but the majority of the eligibility for unsecured business loans remains similar.

The below mentioned are some of the key entities that are eligible for the business loan:

The borrower must be self-employed businessmen/professionals
Limited or private limited company
A borrower may be a manufacturer, retailer or service provider

All the above entities must come under the following criteria to avail business loan:

The age of the borrower must be between 21to 65 years
The business must be in working condition for at least 3 years
The business turnover of the borrower must be at least Rs.50 lakhs per annum with a minimum of 2 lakhs of profit, however lower amount loans may also be availed as per the lender’s discretion.
The last 3 years of ITR statements of business or business owner must be submitted
A business partner of the borrower can be a co-applicant in the business loan application. This is recommended as it would higher the probability of getting a loan of higher quantum with longer tenure and interest rate.

There are some key documents that need to be submitted by an applicant who plans to take a business loan are listed below:

The borrower needs to submit the last 3 years’ Income Tax statements
Bank account statements by the applicant
Applicable certification related to the practice
The applicant needs to provide proof of ownership of the possessions which are used for business purposes
Business proof need to provided
The recent photograph of applicants is the must
There is a need for Identity proofs such as Aadhar Card, Voter ID Card, PAN Card, Company registration certificate, etc. of the borrower/ business
Residence proof of the borrower
KYC(Know Your Customer) documents of the co-applicant (if applicable). If in case business loan for women in the category of choice, there must be proof of majority ownership by the woman provided by the investor.