What is a business loan?
Business loans have seen an entire transition phase in India. Right from heavily secured business loans to now availing security free loans the business loan transition has been quite convenient. A business loan can be taken for an existing business, a new venture, or a start up. Business loans help you enhance your performance in your business without worrying about your liquidity needs for expansion. With interest rates being as low as possible and great guidance from the financing company, a business loan can be a page turner for your venture.
Loans are now provided within a few days due to the superior technology in the digital lending space. Approvals happen within a few days and the loans are granted sooner than expected if the credit check is all clear. Due to this ease in the loan process, lenders and borrowers both have been more inclined towards business loans.
Here are a few pointers on why you would require a business loan
– To kickstart your business.
– To expand your business and take financial aid for that.
– To keep inventory and working capital in line with the demand.
– To have a good cash flow system and ensure to pay for expenses on time.
– To finance heavy equipment, this helps you increase production.
Eligibility Criteria for Business Loans
Through age and time the eligibility criteria for business loans has eased up giving borrowers a bed of choices to choose from to fulfil the eligibility criteria for loans. It has become easier as compared to previous times to now avail a loan with ease and no hassle.
Below is the list of criteria to follow in order to be granted a business loan-
- Age – The first important criteria for the loan application process is the age band you fall within. This helps the lenders to know your repaying capacity and time frame. The age band in India is between 25 to 65 years of age.
- Age of Business – Once you fit the criteria for the age requirement, the next component lenders look at are how old your business is and if it has been stable over the years or no. Ideally, a business that has been existing since 3 years is what comes under the purview of lenders. Along with, the business should be sustainable and have growth potential.
- Books of Accounts – The main concern for a lender is the repayment capacity of the borrower. No lender wants to grant a loan to someone who might not have the capacity to pay the existing loan or default on a few payments. Hence, it is imperative to have accurate and efficient books of accounts, something that is not cooked by the borrowers and shows the true representation of the accounts of the company. A good cash flow, low or no previous debt, growing revenue stream and good profit is what lender looks at usually.
- Tax Returns – With GST now coming into the picture and the government norms becoming more cautions than before, as a firm you need to ensure you are paying all your tax dues on time. Not only that, it is important to ensure the right and full amount is paid as tax and no forms of tax evasions are taking place. No lender wants to lend money to someone who might be in a tax soup later on.
- Credit Score – While applying for a business loan, lenders look at the individual credit score as well because the owner is the face of the company. It is important to have a good credit score as that is your entry point into the loan application process. A credit score is a scale for many things such as good repayment history, business ability as so on.
- Usage of Funds – The final step for the eligibility criteria is why you need the funds and how you intend to use it. If a borrower is adding on additional debt to repay old and existing debt that is a bad sign and not something a lender would want to get into. If the funds are used for expansion, managing inventory all of the characteristics are taken into consideration by the lender.
Now that you know a brief about the eligibility criteria for a business loan, let’s move onto the basic requirements one requires while availing a loan.
- Identity Proof – The first document required is something that proves you are the same person applying for the loan. This document could be your PAN card, Aadhar Card, Passport copy, driver’s license, voter’s ID.
- Address Proof – The next important document is your address proof, where you live and if the same address is provided in the loan document. This again could be your Aadhar Card, Passport.
- Passport Size Photograph – No application is complete with photographs provided for the same, the person applying for the loan should provide at least 2-3 passport size photographs.
- Bank Statements – 6 months bank statements are required by the lenders and sufficient balance is required in the same. This shows that you have good cash balance and ideally would not default on your loan.
- ITR Statement – Just like how tax returns are eligibility criteria for business loans, showing your income tax returns is also a document required while applying for the business loan application.
Frequently Asked Questions
You have read almost everything that goes into getting your next business loan but we’re sure you might have a few doubts. Here are a few of the most common FAO’s asked during a business loan application process.
- How long would it take to approve the business loan?
At flexiloans, we approve a business loan within 48 hours of submission of the application if all the documents are in place and the information provided is accurate.
- How much loan can I avail of in a business loan?
We grant loans up to a sum of 1 crore Rs. So you do not have to worry about the amount and carry on your business efficiently.
- What is the tenure of a business loan?
A loan can last up to tenure of 36 months or 3 years depending upon your repayment capacity and interest rates.
- I do not have any security to keep as collateral, can I still apply for a business loan?
YES! At flexiloans we now provide 100% collateral free loans so you need not worry about any security and take up a loan without hassle.
- How do I repay my business loan?
You repay the business loan with monthly EMI’s (Equal Monthly Instalments). A figure will be come upon between our loan officers and you at an interest rate.
Now that we have covered most of the areas you would require knowledge about while taking on a business loan, what are you waiting for further. Make no delay and apply for your business loans right now. Click here