Every business enterprise which caters to the demand and supply cycle needs funding to operate. This funding can be in the form of unofficial lending or business loans. Since MSMEs make up almost 50 % of our GDP, the government and several public and private banks have introduced targeted and specific business loans for small businesses. Before you decide the type of loan that you want, obtain knowledge of all your options. This article will give you an insight into the type of business loans, their features, eligibility, and application process.
What are business loans?
Business loans are also called commercial loans. The loans that you take to finance your business. You may want to start your business or expand it. The businesses have absolute authority over the loan money. With the help of the loan money, you can buy merchandise or machinery to increase your production.
There are two types of business loans: debt and equity. The third type is a combination of both these types.
| Debt | Equity | Combination |
| Debt loans are the line of credit that the borrower is paid for a specific period. Sometimes these loans can be secure, i.e., the borrower is required to submit his assets for the loan. However, at other times they are insecure when the lender does not ask for any collateral. | Under this type, no transfer of money occurs as the businesses decide to sell a part of ownership to the investor. Instead, each one is liable to the amount equivalent to their share-holding in the profit. | There is also a third type of business loan named combination. As the name suggests, it is a combination of both types of loans. |
Benefits
One of the most usual and widely used options for financing your business is savings and borrowing from family and friends. But often, it is quantum deficient. Business loans from banks and NBFC are a great choice to overcome this problem. Some of how small business loans from NBFC are better than unofficial lending from friends and family are:
- There are many customized options available
- The quantity of unsecured loan amount is high
- A reasonable rate of interest that does not go higher than 1-2% per month
- Quick online processing
- Negligible processing fee. 1-2 % of the loan amount
- Quick and transparent disbursals within 72 hours
- Flexible repayment options
What are the eligibility criteria?
While this eligibility criterion varies from lender to lender, there are a few common requirements that you need to tick to avail the benefits of loans. these are:
- The applicant must be at least 21 years of age to apply for this loan. And the maximum age at the time of maturity is 65.
- He could be a manufacturer, trader, or self-employed professional.
- There is a fixed minimum turnover of at least 10 lakh in the last 12 months
- The individual should be running the business for at least 3 years
What are the documents required for this loan?
Documentation is an important part of any financial borrowing. Banks rely heavily on their documentation process. Some of the key documents required for availing the business loan are:
- KYC documents of the owner that includes his aadhaar card and PAN
- Proof of company’s registration and other legal compliances
- Bank statements to prove the turnover capital
- Other documents specified by the lender
How to apply for a small business loan online?
The procedure for applying for a small business loan online is quite simple. Now the application process can also be completed online. Follow the following mentioned steps to start with your loan procedure:
- Ensure your eligibility
The very first step in the application for your loan should be to check your eligibility. It will ensure that your application is not rejected later on. After ensuring your eligibility, get in touch with the loan representative to guide you on the process ahead.
- Submit application
You can download the application online and fill it. However, you will be required to submit it along with all the other necessary documents requested by the lender.
- Wait for approval
After the successful submission of your documents, the lender will verify and approve your loan. You will receive a confirmation of the same, and the loan amount will be disbursed in your registered account.
Conclusion
This article provides a basic knowledge of types of business loans, eligibility, and application procedure. Personal sources are comfortable unless they fall short to meet the requirements. Hence, be thorough with your research before applying for online business loans.
