Get Your Business Loan Online

What is business loan?

As the name suggests, the loan or credit given to the small or medium/large scale organizations for various purposes such as raising working capital, purchase of assets, infrastructure expansion, and technology upgradation is known as business loan. The finance scheme is basically designed to meet monetary needs of a venture who cannot afford to meet organizational financial needs.

Eligibility Criteria

With the increase in the number of business loan, there is also a variation in the eligibility criteria of the lenders. But the basic criteria remain the same which is given below-

Minimum age of the applicant must be 21 years and maximum 65 years.

Must be Self-employed individual.

The CIBIL score of applicant must be good.

Limited or private limited firm.

Business should be profitable and should have a trading history.

Manufacturer or service provider.

Types of Business Finance Scheme

Though every business has different products and services to offer, their needs differ too. There various credit schemes available in the financial market for specific financial requirements. So, before moving ahead, it is significant to analyze the business needs and then opt for a business loan accordingly.

Let’s have a dig at types of business finance schemes in India:

Term loans – These loans are especially designed to meet financial needs of a business such as raising capital, purchase of equipments, etc. Term loan is mostly recommended for businesses looking to expand their network. The borrowers get a lump sum of cash which they repay in easy monthly instalments along with applicable interest rate over a predetermined tenure.
Pros:

Get cash upfront to invest in business.

Considerably higher borrowing amounts.

Quick funding

Cons:

Requires security or collateral against the loan

Varied interest rates

SBA loans – The Small Business Administration (SBA) loans are offered by banks and financial institutions to the small scale organizations. The loan is offered to meet financial needs of small scale businesses. The terms of the loan vary according to how strategic plan you have for a better financial management.
Pros:

Lower rate of interest

Higher lending amount

Flexible tenure ranging from 7 to 25 years

Cons:

Long and rigorous application process

Must have a strategic business plan

Lines of credit – A business line of credit scheme aims to provide access to funds to manage organizational finances better. The sanctioned amount is then repaid in easy instalments along with the computed interest rate.
Pros:

Flexible borrowing

No collateral required

Easy documentation

Cons:

May include additional fees and charges

Strong market presence required

Not preferred for start up businesses

Start up loans – This is an ideal finance option for start up businesses. The loan is approved solely on the applicant’s credit report and effective business plan. Thus, those having a solid business plan, but no finances to implement the plan can definitely look for startup loans in India.
Pros:

High loan amount

Easy process

Quick approval

Cons:

Only for start up businesses

Requires solid and effective business plan

Based on personal credit history

Non-profit business loans – Even non-profit organizations get affect from components such as economy, technology, marketing costs, demographics, and so on. In addition, the organization shares abundant characteristics with profitable businesses as both have revenues, assets, liabilities, and expenses. All these components decide fate of a company, thus anytime falling short of finances, a non-profit business loan comes as an aid to the situation. There are plenty of options available for the non-profit business loan schemes.
Pros:

Helps in meeting the end need of an organization

Affordable interest rates

Customized schemes

Cons:

Only for non-profit organization

Comparatively lower loan amount

Hefty loan process

Things to consider before opting for business loan in India:

Business loan is definitely a great help when it comes to funding an already existing or a start up business, but this comes with a huge financial responsibility as well. Opting for a business loan can help you get access to the required funds, but there are certain things to be kept in mind before making the huge step. So, here are some fundamental parts you need to take care of at your end for prepping a strategic business plan with a business loan application.

Purpose of loan – First and foremost, stay clear with the purpose for opting the loan. Every business is different and thus, the needs may vary as well. The reason behind can be recruitment, launching new product or service, purchase of inventory, infrastructure improvement, technology upgradation, or so on. Also, having an approximate clear idea about the purpose gives an insight of the required funds. Hence, knowing your exact loan purpose is one of the key factors to determine the amount of funds required.

Business plan – A lender always ask for a business plan to be submitted by the borrower. Thus, one should include following factors in the business plan while filling a loan application form.

Company description

Market analysis

Complete set of projected financial statements

Profit and loss statements

Cash flow and balance sheet

Required funds

Management strategies

Marketing Strategies

Business documents – While filling up any loan application, it is mandatory to attach a copy of required documents as well. Therefore, keep your business-related documents ready to be submitted along with the filled application form. These documents will act as a proof of business registration and reliability.

A copy of business registration

Business license by government authority

Articles of incorporation

Business PAN Card

Business partnership proof (if any)

Franchise agreements (if any)

Commercial lease documents (if any)

Required loan amount – It is necessary to mention the required loan amount for a specified reason. For instance, you are planning to buy inventory, then you should be aware of the market prices of the required inventory. It becomes essentially easy to process the loan application if found reliable and relevant.

Repayment tenure and penalty charges – Though most borrowers often overlook these factors, it is meanwhile significant to be aware of repayment tenure and applicable penalty charges related to business loan. The lender provides the basic information about the terms and applicable charges, but it’s your responsibility as well to thoroughly know and understand all the terms and conditions before signing on the dotted lines. Understanding these terms helps borrower to avoid any conflict or confusion in near future.

Top Government Business Loan Schemes

If survey reports to be believed, India has the third largest startup base after the US and the UK. This is evident that why several banks and financial institutions are coming forward with best startup business loan schemes, and government remains no behind. The government of India has launched several business finance schemes to encourage number of startups in the country. As entrepreneurs don’t have enough capital at initial level, the government has taken the initiative to provide financial assistance to these small scale industries.

MUDRA loan - Micro Units Development and Refinance Agency (MUDRA) is a government scheme which aims to provide adequate funds to micro units and the non-corporate business sector. As the small scale organizations lack substantial funds required for the establishment and development of the venture, the government aims to provide access to the capital. The scheme has been designed to take care of growth and finances at the initial level.
Several banks and financial institutions came forward to support the scheme and provide MUDRA loan as per customer’s requirement. Also, the scheme is structured in three categories based on the lending amount.

Sishu Loans up to Rs. 50,000

Kishor Loans up to Rs. 5,00,000

Tarun Loans up to Rs. 10,00,000

The Credit Guarantee Scheme (CGS) - The CGS scheme, launched by the Indian Government, is specifically designed for micro and small scale enterprises to avail collateral-free lending for non-corporate sector. The best part is that both new and already established enterprises are covered under the scheme. Though the scheme can help in managing finances for an enterprise at initial level, the loan amount is approved based on any individual’s eligibility and past credit record. Also, the rate of interest is kept reasonable so that one don’t feel financially burdened while keeping up with the business responsibilities.

Stand up India Scheme - Stand-Up India Scheme provides business loan for the amount ranging between Rs.10 lakhs and Rs.1 Crore to Scheduled Caste (SC) or Scheduled Tribe (ST) community for setting up a Greenfield enterprise. The scheme particularly aims at encouraging woman entrepreneurship among the SC/ST community.
Basically, a Greenfield enterprise is one which is not constrained by prior work. It is constructing on unused land where there is no need to remodel or demolish an existing structure. The amount can be borrowed for starting trading, manufacturing, or service units. Also, it is mandated to grant loan to at least one SC/ST or one woman per bank branch.

Bank credit facilitation scheme - Bank credit facilitation scheme was initiated by National Small Industries Corporation (NSIC) to meet the credit needs of MSME units and thus, NSIC entered into MoU with various banks and financial institutions. In association with banks, NSIC aims at meeting financial requirements of MSME industry. The credit repayment terms depend on the income generated from the business. Also to be noted that these handholding support provided by NSIC is offered at no cost to the MSMEs.

Coir Udyami Yojana - The Coir Udyami Yojana is basically a credit linked subsidy scheme introduced for the growth and development of the coir sector. Though the scheme doesn’t provide skip up-gradation sessions, it aims at adoption of modern technology for the production and processing purposes. Adoption of modern technology encourages better productivity, efficiency, and quality, which ultimately enhances workers’ income associated to the job.
The pattern of financial assistance is in split where 40% of the project cost comes from Government of India Subsidy, 5% from Bank, and remaining 5% from beneficiary contribution. The Coir Udyami Yojana covers project costing up to Rs.10 lakhs plus working capital, which should not be more than 25% of the total estimated project cost.
Individuals, corporates, non-governmental organizations, self help groups, registered institutions under Societies Registration Act 1860, Joint Liability Group, Co-operative societies, and charitable trust can all take benefits of the scheme.

What is covered under Mudra Loan?

Well, it’s a common question – what is covered under Mudra loan scheme? So, let’s clear the doubt and have a glimpse of the sectors covered under the Pradhan Mantri MUDRA Yojana.

Transport vehicle – Transportation and passenger vehicles such as auto rickshaws, three-wheelers, small good transport, vans, e-rickshaws, tractors, taxis, etc. are eligible for assistance under PMMY scheme.

Community, social, and personal services – Gymnasium, boutiques, beauty salons, tailoring shops, cycle and motorcycle repair shops, dry cleaning shops, photocopy shops, medical, courier agents, etc.

Food products sector – Achaar making, agricultural produce preservation at rural level, papad making, jam and jelly making, sweet shops, canteen services, food stalls, cold chain vehicles, ice making units, biscuit, bread and bun making units, etc.

Textile sector – Handloom, zardozi work, khadi activity, chikan work, traditional embroidery, traditional dyeing, hand work, apparel design, knitting, cotton ginning, stitching, computerised embroidery, and other non-garment products including bags, furnishing accessories, and vehicle accessories.

Traders and shopkeepers – Sole proprietors for running shops, trading, and business activities, non-farm income generating activities, and other service enterprises.

Activities linked to agriculture – Pisciculture, poultry, bee keeping, grading, livestock-rearing, aggregation agro industries, fishery, agri-clinics and agribusiness centres, agro processing units, etc. However, crop lands and land improvement such as irrigation and wells are excluded from the benefits under the scheme.

MUDRA Card:

For better working capital flow, MUDRA debit card is issued against the MUDRA loan account. The borrower or beneficiary can use the card for making multiple withdrawals from the loan amount limit already approved by the lender. This way, it would be convenient to manage working capital in an efficient manner, while keeping the interest burden minimum.

The card can be used for cash withdrawal from any ATM and even for making payment at any PoS outlet. Therefore, it would not be wrong to say that MUDRA loan card is an innovative product designed to improvise cash credit management.

Eligibility for MUDRA loan:

Now, a hundred dollar question is who can apply for the PMMY loan? To this, you need to check the eligibility criteria of the loan. The loan is generally offered to all the non-farm income generating businesses in trading, manufacturing, and services sector.

To get the loan, all you need to do is fill up the MUDRA loan application online along with the attached documents such as personal identity proof, enterprise’s registration proof, quote for the machinery or other goods to be purchased, supplier details, and category proof (if any).

After evaluating your business or project’s finance needs and application category, the lender sanctions online loan up to Rs.10 lakh.

Working capital loan

Cash or funds are life blood of any business, be it small or large scale enterprise. However, sometimes a company falls short of finances and don’t have enough capital to handle day-to-day business operations. Companies that are into seasonal or cyclical business often face such situations and mostly rely on working capital loan to sustain during the periods of reduced business activity. For instance, fruits and vegetable sellers, wall paint companies, fire cracker companies, etc.

Basically, working capital loan is a financial assistance given to companies that find it difficult to manage day-to-day business operations either due to off-season or some other reason. The funds sanctioned can be utilized for the purchase of assets, making investments, raising working capital and/or improving cash flow. Notably, short-term operational needs such as payroll, rent, stationary, and bill payments can poorly affect the business’ cash flow. Thus, working capital loans are angels for better corporate management and to fund its everyday operations.

What businesses qualify for such loans?

Well, unlike any other loan or credit scheme, working capital loan, too, have its eligibility criteria. Let’s check what companies or firms are eligible for the loan:
• Any business unit registered as Limited, Private Limited, Partnership, or Proprietorship Company
• A company must have operational history of at least 1 year
• It should have minimum turnover of Rs.20 lakh annually
• It should have monthly sales of Rs.5 lakh

Benefits of working capital loans:

Collateral free loan – Set your worries aside to pledge any asset or property as collateral security against the loan. Such loans are generally collateral free.
Flexible tenure – Not every business is same and thus, going with this, the loan is offered at flexible tenure ranging from 6 months to 60 months.
Transparent process – One doesn’t have to worry about any hidden charges or terms involved as the entire process is done online.
Easy application process – Bid a goodbye to bank’s restricted visiting hours and long queues. Just log into online portal, fill the application and submit. The process is entirely convenient and hassle-free.
Quick disbursal – No waiting for days to get the funds credited into the bank accounts. Working capital loans are quickly disbursed as soon as the application is approved.
Minimum interest rates – Interest rates consumes a good portion of total repayment amount, but in case of working capital loans as the credit is offered at minimum rate of interest keeping up with your business budget.

A brief about the Term loan

A business, be it small or large scale, is always in need of sufficient cash flow. However, this is not possible all the time and thus, this is when getting a term loan from a bank comes as a determined solution. Many mainstream banks and financial institutions offer term loan at flexible terms and competitive interest rates. So, before proceeding with the loan application, let’s first have an understanding about the basics of the loan.

What is term loan?

Basically, term loan is a financial assistance offered by banks for short and/or long term tenure. This helps the entrepreneurs to bridge the financial gap and improve the business cash flow. Sanctioned loan amount can be used for meeting various end-needs of a business such as raising working capital, plant and machinery purchase, business expansion, product launch, etc. However, the tenure and the rate of interest is subject to the fund utilization for the business.

Types of term loan:

Notably, term loans are classified as per facility, tenure, and security of the loan. Scroll down to grab more details.

Classified as per facility:

Line-of-credit – This is generally preferred by the small scale enterprises. Such type of loan facility helps improving the cash flow as the borrower can access funds from the line of credit set as per the agreement.

Letter of credit – This facility is given to enterprises indulged in international transactions. With the letter-of-credit, borrowers can rest assure to make payments to the suppliers overseas.

Classified as per tenure:

Short term loan – Short-term loan generally refers to tenure of less than a year. Such loan type is usually preferred by the MSMEs, which have seasonal revenues or sales and the business period is confined to just limited months throughout a year. Unlike other loans, the loan payment is made in full at the end of agreed term, instead of paying on monthly basis.

Long term loan – A loan which is taken for a period of more than 1 year is long term loan. This loan type is best suited for the expansion of business, acquiring another business unit, etc.

Interim loan – Bank grants interim loan to the businesses that are out of cash and needs to make urgent payment. Firm’s assets are mortgaged against the loan to the bank.

Classified as per security:

Secured loans – Basically, interim loans are classified as secured loan due to the lower risk of repayment failure. If the borrower defaults the payment, bank can sell the mortgaged assets to recover the loan amount.

Unsecured loans – It is when no assets or security is pledged against the loan. Thus, the interest rate of unsecured term loans is generally higher than the secured ones.

Bottom line

Hence, as the business loan is designed to ease down the financial burden or help you get access to the required finances to take your business to new heights, there are certain responsibilities as well which you need to take care of at your end. So, before zeroing the final decision, analyze your needs, search for the types of business loans, go through the terms and applicable charges, and then seal the deal.