Business Loan

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Concepts & FAQ's Business Loan

What is Business/Commercial Loan?

The main aim of a commercial loan is to help traders, businessmen and professionals, start or expand their commercial activities. Such loans can be secured or unsecured. Loan amounts ranging from Rs. 500,000 to Rs. 10,000,000. The tenure of repayment can be up to 10 years.

Secured business loan: Secured business loans means that the entrepreneur keeps something as collateral against the loan amount taken. Collateral can be anything from raw material to finished products, land and building of the business to plant and machinery. If you have the collateral for the cash advance, you can have the money at relatively cheap rates and with much more flexible repayment options.

Unsecured Business Loan: Unsecured Business Loan, as the name explains is a type of loan that doesn't require collateral. It is typically at a higher rate of interest and is taken for a comparatively smaller tenure.

What are the steps involved to get Business Loans?

To get the best terms on business loans, jot down these steps:

Step 1:
Business loan is a business too. Narrow down lenders after doing your research on them. It is always good to start by building good relations with the lender. Discuss what the company is all about. Build the trust factor.

Step 2:
Decide what the money is needed for. Approach the lenders who grant the type of loan you seek. A loan may be required for many reasons like financing equipment, real estate, working capital needs and so on. In short, approach the right lender. Also decide where to avail the loan. This could be nationalized banks, commercial banks, private banks, financial institutions or NBFCs.

Step 3:
Decide on the amount of loan you seek. Overestimating or underestimating the loan amount can be a problem. It is also good to have your research documented.

Step 4:
Make sure you have a good Credit Score. Credit score decides the fate of your loan. A credit score of 700 is favorable and the business loan could be sanctioned.

Step 5:
Arrange and acquire all the documents needed for a loan application. Documents required are a business plan, business owners resume and financial statements like Profit & Loss A/c, Balance Sheet and Cash Flow Statements, three years ITR and so on.

Step 6:
Be prepared to pledge collateral. Some lenders may seek security to give loans.

Step 7:
Understand terms and conditions of the loan as stated by the lenders. Analyze them based on your business and financial needs.

Eligibility criteria to avail a Business Loan

You need to be at least 21 years of age and 65 years when your loan matures.
Your business needs to have a minimum turnover of INR 40 Lakhs.
You need to have a minimum experience of 3 years in the current business and at least 5 years of total business experience.
Your business should be making profits for at least 2 years.
You need to have a minimum annual income of at least INR 1.5 Lakhs for a loan of INR 15 Lakhs and at least INR 3 Lakhs for a loan above INR 15 Lakhs.You need to have a minimum Cibil score of at least 700.

What are the documents required to avail a Business Loan?

You require to submit owner's/business PAN card details.
Your Residence and identity proof.
Your 6 months bank statements.
Your latest Income Tax Returns along with the computation of income, Balance sheet and Profit and Loss account for the last 2 years.
Your proofs of the business such as trade licenses, sales tax certificates and so on.

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Frequently Asked Questions

Who are eligible for business loans?

Sole proprietorship businesses, partnerships and private limited companies are eligible to apply for business loans. These days even self employed but highly qualified people are provided with business loans.

What is the maximum term for which business loans are availed?

The maximum term of a business loan depends on its type. Business loans like Demand loans are granted for a term as low as a few days, whereas term loans are granted for tenure of up to 20 years.

In what form are business loans availed?

Secured and unsecured loans:
A secured loan is a loan which is given against security or collateral. An unsecured loan, on the other hand, is given without any collateral or security. Secured loans have lower interest rates compared to unsecured loans.
Short-term loans:
Short-term loans are business loans granted for a short period of time ranging from 3 months to 18 months.
Line of credit:
This is a type of short-term business loan. This is a permanent loan arrangement between borrowers and their bankers. Such loans are useful in case of emergencies. Line-of-credit loans are designed for inventory purchases, to meet working capital needs, and not to meet bigger requirements like purchasing real estate or buying equipment. Line-of-credit loans generally have low-interest rates.
Equipment financing:
This loan is designed specifically to fund the purchase of new equipment needed for the business. The same equipment will be pledged as collateral for the loan.
Balloon loans:
These loans facilitate the payment of interest during the life of the loan, whereas, the principal repayment is due on the final day.These loans are best when you have to wait for a specific date to receive payment from a client and then make the repayment.
Interim loans:
Interim loans are also called bridge financing. These are short-term loans with a high rate of interest, which are availed until the borrower gets permanent financing or fulfills an existing obligation.
Letter of credit:
Letter of credit, commonly known as LCs, are used in international trade. This is a guarantee given by a bank to pay suppliers abroad in case the importer defaults on payments.

What are the eligibility requirements to take out a business loan?

Your personal details, such as how long you have been in business and your credit history, will be taken into account, along with other factors such as the income or projected income of your business, any assets, and more. You should check the eligibility requirements with each service provider that you consider, as they can vary from one service provider to another.

What are the risks associated with business loans?

Depending on the company and loan that you opt for you could be risking certain assets, or even part of all of your business if you do not keep up with repayments on the loan. It is therefore important to discuss your requirements thoroughly and ensure that your business can comfortably afford the repayments on the loan before you make any commitment.

How long does it take to receive funding?

From the date of application to actual funding, if a loan application is thorough and complete, the process can take from 7-21 days for loans under Micro and Small Business loans. Fast Track loans are processed within three business days.

How important is my credit history in availing a business loan?

Bank reviews the borrower's credit report and credit score in considering loan requests. In some cases they extend loans even when credit scores are lower than average. Is your credit history stopping you from thinking about a business loan? Call us on 080 67974000 and understand the eligibility criteria!

Can I go for a top-up business loan in the future?

Yes, you can go for a Top-up loan. The top-up loan allows you to borrow an amount over and above your existing loan. Such loans are given based on the repayment ability and past records of the borrower. The tenure of top-up loans changes from bank to bank. The interest rates on top-up loans are slightly higher.

Can I go for the early settlement of my loan?

Yes. You may go for an early settlement of your loan. This would be subject to pre-closure charges, as applicable.

What kind of businesses is not eligible to apply?

Businesses like sexually oriented businesses, gambling establishments, businesses with over 51% of revenues generated from liquor sales, businesses organized for religious purposes, residential builders and speculative real estate investments are not eligible to apply for loans. To know the various kinds of Business Loan available, call us on 080 67974000 and ask our experts!

What are the types of Business/Commercial loans?

Professional loans: Leading banks are catering to the need of self employed professionals like Doctors, Chartered accountants, Interior Decorators, Architects, Company Secretary Etc. by offering them professional loans at lucrative rates. Manufacturing/ trading/processing units are not eligible for such a loan. These loans are unsecured in nature.
Trade Loans:Present day trading involves heavy initial investment and pooling in continuous financial resources. Banks are providing trade loans to traders / businessmen to help them set up or expand their business.

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#6 Plan a Presentation and Make the Appointment

Wednesday, May 30, 2018, 11:40 AM

Prepare a presentation of your business plan and application for your loan officer. Be sure and include an Executive Summary. Many loan officers read the Executive Summary first and decide whether they are interested based on that. Make an appointment with your loan officer and request enough time to do a short presentation, with visual aids, based on your business plan. Be short, brief,

#5 Prepare Your Business Plan

Wednesday, May 30, 2018, 11:36 AM

This may be your most important step. In order to get a small business loan from just about any lender, you have to prepare a good business plan. The business plan is in addition to the loan application required by the financial institution. It will also include a statement of collateral or the type and value of assets you will use to secure the loan.

#4 Start Reviewing Your Borrowing Options

Wednesday, May 30, 2018, 11:33 AM

Look at the commercial banks available to you. Don't just go to the large, national commercial banks. You may have a better chance for a loan at the smaller regional commercial banks. There are other options such as microfinance loans that make loans to startups. If one lender turns you down, another may say yes to the same loan application so keep trying.

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Investment Calculator

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Expected rate of return on investment

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Future value of investments

33,49,85,214

Total investment made

10,00,00,000

Your investment has grown to

23,49,85,214

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What is investing?

Setting aside your money now to get more money in the future.You earn an income each month. You set aside some amount for your basic needs as savings. You maintain 3-6 months of expenses in your savings bank account for any contingencies and invest the rest.

If you are a conservative investor you will invest in fixed income securities such as fixed deposits. The amount you invest (Principal) is safe and you get interest on this amount. If you are an aggressive investor you invest in equity. You get a higher return at a higher risk. The amount you invest could double in a short time or even be lost. You may get a higher return than fixed income investments but the risks are high.

How to invest?

You can invest fixed amounts of money every month for a fixed period of time in an equity mutual fund. This is a systematic investment plan (SIP). You can calculate returns you get through an SIP using an SIP calculator.

You may have an investment goal where you may need a few lakhs for your child's college education in 5 years time. How much money you need to set aside now to achieve your investment goal can be calculated using the investment goal calculator.

How an online investment calculator works?

You can easily calculate your investment returns with a high degree of accuracy using the online investment calculator.

This online investment calculator has 2 options:

Calculate your investment returns yearly.
Calculate your investment returns monthly.

How to calculate investment returns yearly using online investment calculator?

Step 1:You have to fill the amount you want to invest each year by adjusting the slider on the scale of the monthly investment in the investment calculator. You can also fill the amount directly.

Step 2:You fill the rate of return you would like to get. If you are a conservative investor you fill 8-9%, and if you are an aggressive investor you fill 11-12% using the slider on the scale of the expected rate of return in the investment calculator. You can also fill the expected rate of return on your investment directly.

Step 3:You have to choose a period in years which you intend to stay invested. You fill this time period using the slider or directly in the total investment period of the online investment calculator.

Step 4:You have to enter any current investments you hold in the current investments slot. The investment calculator will calculate your returns on this amount as per the expected rate of return you have entered earlier.

What does this online investment calculator shows you?

Your investment calculator will give you the future value of your investment. You are also shown the total investment you have made and the total amount your investment has grown to.

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Business Loan

Get the best advice onBusiness Loan

What is a Business Loan?

Features Of Business Loan

Benefits Of Business Loan

Business Loan interest rates:

Ask Wealth Doctor

Money for Business

All kinds of Business

Special Schemes

Women Entrepreneurs

Concepts & FAQ's Business Loan

What is Business/Commercial Loan?

What are the steps involved to get Business Loans?

Eligibility criteria to avail a Business Loan

What are the documents required to avail a Business Loan?

Ask Wealth Doctor

Who are eligible for business loans?

What is the maximum term for which business loans are availed?

In what form are business loans availed?

What are the eligibility requirements to take out a business loan?

What are the risks associated with business loans?

How long does it take to receive funding?

How important is my credit history in availing a business loan?

Can I go for a top-up business loan in the future?

Can I go for the early settlement of my loan?

What kind of businesses is not eligible to apply?

What are the types of Business/Commercial loans?

Business Loan Articles

Taking Business Loan from Private Banks

Business Loan Interest Rates, Calculations And Eligibility

How To Get A Business Loan From A Bank?

Business Loan News

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Business Loan Education

#6 Plan a Presentation and Make the Appointment

#5 Prepare Your Business Plan

#4 Start Reviewing Your Borrowing Options

Calculator

Investment Calculator

Future value of investments

Total investment made

Your investment has grown to

What is investing?

How to invest?

How an online investment calculator works?

How to calculate investment returns yearly using online investment calculator?

What does this online investment calculator shows you?

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