Running a business is not easy, the role of a business loan is important in running a business successfully. That’s because to run this business in the form of business, there is always a need for money in the form of fuel. That is to say, the entrepreneur needs to make payments and purchases to run the business operation successfully, which is not possible without money. If an entrepreneur will not be able to make the necessary payments and purchases for the operation of his business, then his business will come to a standstill.
Because of these problems of entrepreneurs, business loans are offered by almost every bank and other financial institution. Although the eligibility for a business loan has been determined by every bank, to which individuals or business units they have to give the loan. Therefore it is not necessary that if you have applied for a business loan, then you will definitely get the loan. Rather, your application may also be rejected.
Generally the lender i.e. the lender assesses the size, nature, profit-making potential of your business, i.e. he wants to make sure that your business is capable of repaying the loan or not. Business Loans are provided to such business units, which have the ability to repay that loan. Since business units require money from time to time for their business purposes, the business loan has become a major tool for the modern businessman.
So, if you want to make the most of the opportunities that come your way, you need to enable your business to make payments and purchases. To overcome the shortage of cash, you can take the help of business loans offered by various banks and financial institutions.
What is Business Loan?
A business loan is a loan that is taken specifically to fulfil business purposes. It is also a loan like other loans which is repaid with interest over a fixed period of time. Various types of business loans are offered to entrepreneurs by banks, financial institutions, non-banking financial companies, etc.
It can be said clearly that the loan given and taken for the fulfilment of business objectives is called Business Loan. Therefore, only a person who is already doing a business, or is planning to start a new business, can get a business loan.
Generally, business loans can be divided into secured and unsecured. When the entrepreneur keeps his house, land, jewellery or any other property as security instead of taking a loan, then it is called a secured loan. When the entrepreneur is unable to repay the loan, he may lose his right over the property he has held as security.
Why should you take a business loan?
Every business unit can have its own objectives behind taking a business loan. With this, the entrepreneur can proceed on the ground with the plan to earn more money without any change in the ownership of his business. Business loans are generally taken by entrepreneurs for the following purposes:
1. To start your own business
When an entrepreneur starts a business, he does not start earning from the very first day. Rather the truth is that first, the entrepreneur has to spend money, after that his earnings can start. Therefore, such entrepreneurs who want to start their own business, apply for a business loan. Many banks provide loans up to 80% of the total project cost to the entrepreneur.
2. To run the business
Not all days in business are the same, but there are ups and downs. And sometimes businesses are going through a very difficult phase due to a lack of funds. Even if the funds are not available at that time, there may be a situation of closure of the business. That’s why many entrepreneurs apply for business loans just to keep their businesses running.
3. To expand the business
Entrepreneurs whose business is making a good profit, and are also running it successfully. But now they want to expand their business or want to increase the scope of their business, then they may also need a business loan.
How to get a business loan?
As we have already told that if you want to start your own new business, keep the business running or want to expand the business. So you can apply for Business Loan. But keep in mind that it is not necessary that applying does not mean that you will get a business loan. Rather, the final decision of whether to give you a loan or not is taken by the bank or the lender itself.
Every bank or lender that is offering a business loan, first sets the eligibility criteria, so that only the eligible person or entity can apply for the loan. Therefore, if you are also feeling the need for a business loan, then first of all you should assess the eligibility criteria of the bank or lender from whom you are thinking of taking a loan. And apply for the loan only if you are eligible, this reduces the chances of the loan getting rejected.
1. Assess Eligibility Criteria
If you are thinking of taking a business loan, then first of all you should check your eligibility. Although the eligibility criteria may vary from bank to lender basis, some of the general eligibility criteria that almost every bank and lender may ask to be fulfilled are as follows.
- The applicant should be a citizen of India.
- The age of the applicant should be between 24 years to 60 years.
- The business unit should have completed at least 3 years of commencement.
- At least CIBIL scores 685.
2. Assess the Properties and Features of Business Loan
If you think that you or your business is eligible to get a business loan, then now you have to select a bank or lender from where you are eager to take the loan. And then try to know about the features and benefits of the loan you want to take. If you want, you can keep the following things in mind.
- Loan repayment time.
- Amount of loan to be sanctioned.
- Collateral required for the loan.
- The interest rate charged on the loan.
- Processing Fee.
- Document processing charges and other charges.
- Foreclosure charges and maintenance charges.
3. Prepare the Required Documents
To take a business loan, many types of documents are required, which can be related to the entrepreneur and his enterprise. Generally, the list of some basic documents is as follows.
- As a KYC document, any one of the documents may be required like Aadhar Card, PAN Card, Voter ID Card, Driving License etc.
- Electricity bill, rent agreement, passport, etc. may be required as proof of address.
- GST returns, bank account statements, etc. may be required as financial documents.
- Documents related to business registration may be required as a document of ownership of the business.
4. Visit the website of the bank or lender
Now if the aspiring entrepreneur has prepared all the necessary documents, then now the next step which the lender or bank entrepreneur has chosen to take the loan is to visit the website. At present, all the banks and lenders have given the option of applying for various types of loans online through their websites. You can easily apply for a business loan through their website.
5. Fill in your details in the form
As soon as you click on Apply Now for Business Loan, a form opens up. In which you have to fill in your basic information, from contact details to your loan requirement, you have to fill it well and correctly. Keep in mind that while applying for a business loan, any wrong information in the form can get your loan rejected. Therefore it is necessary to fill in this information accurately and correctly.
6. Upload Required Documents
Now to confirm the information or details that you have filled in the form, the bank or lender may ask you to upload the necessary documents related to it. However, many lenders first call up the entrepreneur to get all the details and then upload the required documents for document verification. Keep in mind that the larger the amount of business loans, the more complex will be the process of document verification and loan approval.
7. Wait for the lender’s reply
Now that you have applied for a business loan, you need to give the lender some time to make a decision. This time can be anywhere from 15-20 days depending on the working style of the bank or the lender.
FAQs
Q. Who can apply for Business Loan?
Ans. Businessmen, business units, partnership firms, private limited companies, self-employed people, etc. can apply for business loans.
Q. What is the minimum turnover required to apply for a business loan?
Ans. Though it may vary from bank to bank, generally there is no limit on turnover, rather it should be at least 3 years since the business has been in operation.