business loan in India

Guide To Get A Business Loan For Your Startup

Introduction

According to a recent report, India is third in the world when it comes to startup ecosystems. New startups are sprouting up all over India, and there are now 14,000 of them nationwide, an increase of twenty times in five years.

To build and expand their business, startups need capital, which they might not have enough of. The best financial solution to their problem is startup loans. 

How Can Startups Get a Business Loan?

An individual or group of individuals can take out startup loans (business loans) to start a business. They can also take out startup loans to expand an existing business.

To get a business loan, individuals have to fulfill the eligibility criteria of the lenders, which may differ from lender to lender.

With Fullerton India, getting a business loan is hassle-free, and the eligibility criteria are easy to meet. The criteria are:

  • A resident citizen of India between the age of 21-65 can avail of a business loan.
  • CIBIL score should be at least 700.
  • Your startup should be in operation for at least 2 years.
  • The minimum annual income of the startup should be Rs. 2 lakhs.

Further, the startup will also be required to submit some business loan documents for loan approval. To know more about the business loan documents required, click here. 

Conclusion 

Planning for your business’s loan can be overwhelming. It is crucial to select the right financing partner. Partnering with someone who understands the needs of a startup and offers flexible financing will always make your business’s life easy.

With Fullerton India, getting a business loan for your startup is hassle-free; get a customized business loan with flexible repayment tenures at attractive interest rates and a maximum loan amount of up to Rs. 50 lakhs.

Must Read: 10 Tips to Prevent yourself from Business Loan Scams in India

How to Choose the Right Business Loan?

NBFC-Business-loan-sss

A business requires quick funds for maintaining cash flow or meeting expansion needs. Lending institutions give you such finances through customized Business loans. Business loans are unsecured loans for fund requirements for a quicker turnaround time of up to 5 years. If you are looking for a business loan, here are a few tips for choosing the right one.

Tips for Choosing the Right Business Loan:

  • Determine your Requirement

Before borrowing a business loan in India, every borrower needs to understand their requirements first, which will prevent them from over-borrowing. Additionally, smaller loan amounts are approved quickly.

  • Be Aware of Processing Time

If you are applying for urgent funds, it is imperative to learn about the lender’s approval and the time to disburse the funds. Some lenders even provide you loans up to 50 lakhs within 24* hours. 

  • Check For a Good Online Presence

Lenders with a robust digital presence will offer more manageable loans. Going to the branch with business loan documents to address loan issues or queries is stressful. Hence choosing digitally-enabled lenders with efficient customer service will help you with a hassle-free loan tenure.

  • Competitive Interest Rates

The interest rate is a factor that determines your loan affordability. Checking online for lenders who offer attractive interest rates along with lower miscellaneous charges will help make your loan cheaper. 

  • Flexible Repayment Schedules

Planning your repayment schedules is required before taking the loan, and it will give you the insight to prepare your loan better. Calculate the EMI and desired repayment tenure using the Business loan EMI calculator. This free tool will help obtain a better insight into planning your repayment schedules.

Apart from the above criteria, you need to always look for an established lender with an efficient customer service network for a more straightforward and customized loan process.

Must Read: Get Quick Approval for Business Loan – A Step by Step Process

Factors that Determine Instant Approval for a Business Loan

If you’re the CEO of a huge corporation that needs to expand a certain division, a small business owner who seems to grow, or a young entrepreneur, your top goal is to get cash at the correct time. Here is a list of elements that influence the approval of your business loan.

The borrower’s age

The comfort with which you can obtain a business loan in India is directly proportional to your age. Finding a lender ready to provide a business loan to someone under 25 or over 60 is challenging. 

Earnings

A company with a high-profit margin is approved for a business loan right away. However, if you need a loan for a new business with no collateral, your business plan and growth strategy will influence whether or not you are approved.

Credit Reports

To get a speedy business loan approval, your credit history or business loan documents are crucial. Your credit history establishes your trustworthiness and ability to repay a debt.

Cash Flow

If your company’s cash flow is insufficient, most lenders will be hesitant to offer you money. So, you should maximize your cash flow by using effective cash management and expenditure restraint.

Build a business plan

Your repayment ability is reflected in a business strategy with an appealing sales prediction. It gives the lender insight into your company’s objectives. 

Criteria for Business Loan Eligibility

  • You must have been in operation for at least three years.
  • The applicant must be between the ages of 25 and 65.
  • Audited financial statements from the previous three years and ITRs for at least the last year are necessary.
  • The applicant’s credit history must be excellent.

Must Read: How Business Loans Take Your Business to a Higher Level?

How Can You Avail Quick Business Loans In 2021

You can avail of a business loan for expanding your business or for additional expenses related to your business. These loans are customized based on the business requirements to keep your business running smoothly. Business loans do not need collateral and hence require a lesser waiting time to process the loan. You can apply for a business loan from a bank or NBFC quickly. A business loan can be obtained promptly within 15 minutes to a week, depending on your documentation, eligibility, and the shortlisted lender.

How Can You Avail Quick Business Loans In 2021?

To avail of quick business loans, one must meet eligibility criteria for the loan. Check out the eligibility criteria below:

Business Loan Eligibility

  • You need to be a Self-employed individual/ proprietors/ private limited company/ partnership firm working in manufacturing, trading, or services.
  • The business should be at least three years old, and you need to have at least five years of business experience.
  • You should be at least 22 years of age while applying for the loan and less than 65 years of age at the time of maturity.
  • Enterprises should have a minimum turnover of Rs 10 Lakhs.
  • Enterprises should have been making profits for the past two years.
  • Enterprises should have a Minimal Annual Income (ITR) of Rs 2 Lakhs per year.

Business Loan Documents

Business loans require minimal documentation as they are collateral-free. The loan application involves the primary KYC documents to establish your identity and business process.

Here’s a checklist for your reference:

  • Recent photographs
  • Pan CARD
  • Address proof
  • Bank Statements
  • GST or ITR 
  • Income proofs for the past six months
  • Proof of business existence

You can avail of business loans of up to Rs 50 lakhs*  without collateral. The loans are credited within 24* hours if all the documents are intact. So, go ahead and apply for a customized business solution that you can flexibly repay within 60 months. 

Must Read: 10 Questions Lenders Will Ask When You Need a Business Loan

Does My Small Business Qualify for a Business Loan?

Factors to Consider if You Need a Small Business Loan | Accounting ...

Every business starts small, with the hopes of becoming a global name one day. It requires a lot of effort, constant growth, and funds. While you can take care of the first two by working with qualified professionals, you might need to raise funds. A small business loan can come to your aid in such a case. You can research business loan interest rates, but a few factors decide your eligibility. Here are the basics:

  • Credit Score: It may be risky, but a business loan of a large amount can be granted to you if you have a splendid credit score and a low-interest rate. The lender will see your credit history, the repayment of previous loans, your credit card transactions, and if all this adds up to a minimum CIBIL score of 750, you’re good to go.
  • Cash Flow: A steady and healthy cash flow of your business will assure the lending institution of your capability to repay the loan. So, this is important when deciding your eligibility.
  • Age of Business: Most businesses and start-ups shut down in their first year of operations. Hence, any lending institution requires a steady operational age of at least two years before granting a business loan.
  • Collateral: There are secured and unsecured loans that you can avail of for your business. While unsecured loans do not require any collateral, the borrowing amount reduces. A secured loan can offer you a more significant amount with a lower rate of interest due to the collateral kept on the table.

Keep these in mind when you apply for your small business loan!

Must Read: 5 Tips Women Can Follow to Get an Approval on Business Loan

Debt Financing Vs Equity Financing – Which Works Well For Business Owners?

Running or starting a business is never a child’s play for obvious reasons. Apart from the hard work and strategies that go into commencing the company, having necessary funds is important as well. As a small business owner, you have a few options to choose from when it comes to finances. Out of the possibilities, business loans, debt financing and equity financing work best for small business owners. Let’s find out which is the most suitable for you in the below section.

Debt Financing vs. Equity financing – which works well for business owners?

Criteria Debt financing Equity financing
Definition Debt financing is the type of funding where you avail loans from the lender with an agreement to pay back in equal installments.  Equity financing means selling the shares of the company to investors who will take part in profits once the business turns successful. 
Risk The risk factor is high as the collateral is with the lender, and missing out on repayments can result in the taking over of assets by the lending institution. Equity financing is practically risk-free for business owners as the investors take the risk here.
Control As a business owner, you have full control of your business since there is no control from the lender’s end once the loan is paid You have lesser control and need to discuss with your investors on significant decisions
Difficulty level Since most lenders provide business loans, getting loans might not be too difficult Getting an investor can be tedious

Conclusion

Based on the above criteria, a business owner can decide on choosing the best option and apply for a loan with the appropriate business loan documents.

Must Read: Short-Term and Long-Term Business Loan- Which One Is Best For You?

Top 5 Factors Affecting Your Business Loan Application

business lq

Although there are a lot of factors that affect the approval of a business loan application, some factors affect most applications. Capital is essential for all companies to build, grow and sustain. You can smartly apply for business loan by checking the list of the five most common factors affecting business loan applications. It would let you get an edge over other applicants before applying for a business loan.  

  1. Maintain a healthy credit history/credit score
  2. Business plan and model of investment
  3. Type of business (Risk level of your business)
  4. Age and size of your business 
  5. Availability of assets and collateral

These factors are known to play a crucial role in the acceptance or denial of your business loan application. You can use a business loan EMI calculator to make sure you can pay off monthly EMIs of your loan, and your credit score does not get affected.

Conclusion:

Looking forward to these five factors can help you better understand the lender requirements. Remember that your credit score can have a considerable impact and thus make sure to clear all your dues and liabilities before applying for a business loan.

Additional Read: What Parameters Checked By Nbfc For Giving A Business Loan?

What Are The Small Businesses Loans Available For Minorities?

business loanm

In this harsh world of business, it is challenging to become a top entrepreneur, especially for minority business owners. To aid financial necessities in income-generating ventures and solidarities the National Minorities Development and Financial cooperation have devised concession loans.

There are different types of business loan in India. One can choose according to their requirements. Let’s delve further into this.

There are two credit lines for annual income defined to be eligible under this scheme.

  • Credit Line I : 

    • Rural sector: Rs. 81,000
    • Urban sector : Rs. 1.03 Lakhs
  • Credit Line II:

    Annual family income of Rs. 6 Lakhs

Schemes:

  1. Term Loans
Line of Credit  Max Limit allowed
Credit I Rs. 20 Lakhs*
Credit II Rs 30 Lakhs*

The Interest rate for 

  • Men: 6% 
  • Women: 8%

2. Micro Finance

Line of Credit Max Limit  Interest rates
Credit I 1 Lakh* 7%
Credit II 1.5 lakhs* Men: 10% 

Women: 8%

3. Mahila Samridhi Yojana

  •  Self-help women groups are sanctioned micro-credit of Rs. 1 Lakh* per member 

Small Business Loans from NBFC

Specific NBFCs, e.g. Fullerton India, provides solidarity loans from Rs. 22,000 to Rs. 45,000* for short tenures for women without any collateral.


Conclusion

Small business loans help small ventures to grow. Applicants can choose the best-suited plan, lender and interest rates using business EMI calculator.

Must Read: Top 6 Business Loan Myths That You Should Ignore

Difference Between Business & Personal Loan

download (5)

Loans are a great way to get cash liquidity in times of need. They come in handy when in need of urgent capital, may it be for your business or any other personal reason. Borrowers usually get perplexed about whether to go for a business or a personal loan. Both are avail for different purposes. yet people get confused while opting for it.

Business Loan is apply when you require a large amount of money for funding your business. The business may be  partnership firms, pvt. Ltd, private etc.

Personal loans are unsecured loans avail by individual to fulfil their personal needs. It may be for education, wedding, buying expensive gadgets, travel, holiday, medical emergency and much more.

Hence, before opting for the loan analyse your situation wisely and go for the option that best suits your needs.

Must Read: How to Expand Your Small Scale Business into Large one?