Business Loan Information
What is a business loan?
Business loans are of both type, secured and unsecured financial assistance provided by banks and NBFCs in India. The objective of the business loan is to support the requirement of growing business. Most financial institutions offer term loans, overdraft facilty, cash credit and flexi loans to cater to the business needs of a company. Business loan can be provided to all types of businesses such as a sole proprietorship, privately ltd company, partnership firms, self-employed individuals and retailers can avail unsecured as well as secured business loans.
Why are business loans attractive for business - existing and start ups?
A Start up can go a long way in meeting their operational requirements as the billing or the payment cycle with clients can varies from industry to industry. So business loans can help meet these requirements such as business expansions, dealer and vendor financing etc. We know that these loans are provided without collateral security in case of unsecured loan or it can be provieded against collaretal in case of secured business loan. It makes it very easy to apply for a bank loan for business. Another attractive feature of business loan obtained by a company is that in the event of a loan default, the company can be liquidated to pay off the dues.
For unsecured loan, approaching a bank or NBFC for a business loan is a better proposition compared to seeking investment from venture capitalists. Unlike VCs, banks do not ask for any equity dilution. Moreover, banks also structure loans depending on their unique requirements.
What are the interesting features of a business loan?
Foremost, a business loan interest rate remains fixed throughout the tenure. However, depending on the profile of the borrower, a lender may also offer a floating rate of interest, in which case the interest rate will vary through the tenure of the loan. Typically, rates vary between 11%- 19% (subject to change).
Unsecured business loan is offered up to Rs. 50 lakh. Just to explain the amount or limit of e loan depends on the profile of the borrower and business performances. However, credit history is also crucial while the loan application is processed. If you have a decent credit score, it will be easier to get a higher amount at an attractive rate of interest.
The repayment tenure of the loan is between 1 to 5 years and depends on the ability to repay.
Availing start up business loans is also preferred because there’s minimal paperwork. Most financial institutions only require KYC documents to process the loan application. This makes the process hassle-free.
Type of Business Loan
Secured Business Loan: Upto 5 Crore
- Start Up Loan : Only in govt. approved categories of projects
- Term Loan : It is purely based on existing business performance
- Overdraft Facility : It is purely based on existing business performance
- Project Loan : 100% of collateral required with min 3 years of existing bsuiness
Unsecured Business Loan: Upto 50 Lakhs
- Start Up Loan : Especially for women entreprenuers with more than 50% share
- Term Loan : Min Business tenure of 3 years. It is based on existing business. Fixed EMI and Tenure like personal loan
- Overdraft Facility : Min Business tenure of 3 years. It is based on existing business.
- Project Loan : Min Business tenure of 3 years. Companies want to expand have new projects lined up