Business Loan Overview
Business loan helps traders, businessmen and professionals to start or expand their commercial activities. The loan can be secured against a collateral in the form of property, finished goods, etc or can be availed without keeping any collateral security. This unsecured business loan is more expensive than secured business loan.
Purpose of Loan
Business Loan can be availed for all business purpose like working capital requirement, purchasing of fixed assets, capacity expansion/ modernization, technology up-gradation, Research and Development or any other short-term requirement
Loan Amount and Eligibility
The loan amount will depend on profit and years of business and cash flow
Eligibility for business loan will vary from bank to bank and will depend on various factors. Your ability to repay the loan will be verified by the bank on the basis of your line of business, profitability, financial statements, etc.
A self-employed individuals / business owners in the age group of 21 to 65 years can apply for business loan. The annual turnover of the business will vary from bank to bank, The business needs to be in continuity for the last 3 years showing positive trends in turnover and profit for the last 2 years.
Business loans can be sanctioned for a fixed term (12-48 months) or may involve a revolving line of credit or they may be in the form of an overdraft facility.
Fees and Charges
Normally lender charges a fee of up to 2.5% of loan amount towards the processing of loan.
The lender may charge you a penalty for early closure of loan.
The document required for processing of business loans are
- PAN Card – For Company /Firm/ individual.
- Proof of your identity: Copy of Aadhaar Card/Passport/Voter’s ID card/Pan Card/Driving License.
- Proof of your address: Copy of Aadhaar Card/Passport/ Voter ID-Card/Driving License.
- Bank Statement (latest 6 months)
- Latest ITR along with computation of income, Balance sheet and Profit & Loss a/c for the last 2 years. Financial should be CA Certified /Audited.
- Proof of continuation (ITR/Trade license /Establishment /Sales Tax certificate)
- Other Mandatory Documents (Sole Prop. Declaration Or Certified Copy of Partnership Deed, Certified true copy of Memorandum & Articles of Association (certified by Director) & Board resolution (Original)
Loan Service Providers
Some of the providers of business loan in India are State Bank of India (SBI), HSBC Bank, ICICI Bank, HDFC Bank, Fullerton India, Bajaj Finserv, etc.