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Grow your business, Stress-free financial support

Grow your business, Stress-free financial support

Business loans are designed to help small businesses and entrepreneurs meet their capital requirements. There are over 20 financial institutions in the country offering tailored business loans at attractive interest rate to suit your financial needs.

Business Loan Details

Interest Rate 8.85% p.a. onwards
Loan Amount Up to Rs.40 crore
Loan Tenure Up to 120 months
Processing Fee Up to 6.5% of the borrowed loan amount

Business Loan Eligibility

To avail a business loan from a lender, you will need to check if you meet the eligibility criteria listed by the lender. Listed below are the general eligibility criteria to avail business loans:

  1. The loan can be availed by self-employed professionals, self-employed non-professionals, & entities.
  2. Self-employed professionals usually include doctors, chartered accountants, company secretaries, architects, etc. This is subject to the applicants who have proof of qualifications and also are practicing their profession.
  3. Self-employed non-professionals include traders, manufacturers, etc.
  4. Entities include partnerships, limited liability partnerships, private limited companies, closely held limited companies, etc.
  5. The business may be required to have a minimum turnover of Rs.40 lakh
  6. Minimum of 3 years’ experience in the current business is required.
  7. Minimum 5 years of total business experience is required.
  8. The business should be making a profit for the last 2 years.
  9. Minimum Annual Income (ITR) of Rs.1.5 lakh per annum is required.
  10. Applicants should be between the ages of 25 years and 55 years.
  11. The IT returns for the last 1 year should have been filed.
  12. Lenders may offer business loans to only certain cities and towns.

Documents required to apply Business Loan

In order to apply for a business loan, you will require the following documents-

  • PAN Card for Company, Firm or Individual.
  • Proof of ID, in the form of, copy of Aadhar Card, Passport copy, Voter’s ID copy, driving license.
  • Proof of address, in the form of, copy of Aadhar Card, Passport copy, Voter’s ID copy, driving license.
  • Bank statement (last 6 months)
  • Latest ITR along with computation of income, balance sheet and P&L account for the last 2 years. All financials must be CA certified or audited.
  • Proof of continuation (ITR/Trade License/Establishment/Sales Tax Certificate)
  • Sole Proprietorship Declaration or certified copy of Partnership Deed.
  • Certified true copy of Memorandum and Articles of Association.

Comparison of Business Loan in India by banks

Lender Interest Rate Loan Amount Loan Tenure
HDFC Bank 11.90% p.a. to 21.35% p.a. (Rack interest rate) Rs.50,000 to Rs.50 lakh 12 months to 48 months
IIFL 11.75% p.a. to 32% p.a. Rs.1 lakh to Rs.50 lakh 12 months to 60 months
Fullerton India 17% p.a. to 21% p.a. (floating) Up to Rs.50 lakh 12 months to 48 months
DHFL 17% p.a. onwards Up to Rs.10 lakh (without collateral) Up to 5 years
Magma Fincorp 15% p.a. to 26% p.a. RUp to Rs.30 lakh Up to 36 months
Kotak Mahindra Bank As per the lender’s terms and conditions Rs.75 lakh Up to 48 months
Karnataka Bank 9.41% p.a. onwards Rs.1,500 lakh (will vary based on the type of scheme) Up to 120 months (will vary based on the type of scheme)
Tata Capital 19% p.a. onwards Rs.5 lakh to Rs.75 lakh 12 months to 36 months
SBI (Simplified Small Business Loan) As per the lender’s terms and conditions Rs.10 lakh to Rs.25 lakh Up to 60 months
Mahindra Finance (Unsecured Business Loans for SME) As per the lender’s terms and conditions Up to Rs.40 crore Up to 84 months (will vary based on the type of scheme)
Federal Bank (Asset Power Scheme – Business Loans for Professionals) 8.85% p.a. Up to Rs.7.5 crore Up to 120 months
Standard Chartered Bank (Business Installment Loan) 17.25% p.a. onwards Rs.10 lakh to Rs.75 lakh Up to 60 months

Business Loan New Announcements

  • Under the economic package of Rs.20 lakh crore announced by Finance Minister of India Nirmala Sitharaman, loans by Non-Banking Financial Companies (NBFCs) to commercial real estate sector, a time period of one year will be provided for the commencement of commercial operations
  • The biggest highlight of the economic package announcement was the Finance Minister announcing that an emergency credit line of up to 20% of the outstanding credit as on 29 February 2020 will be provided to the MSME sector. This will allow MSME units to restart their business. This loan can be availed by those who have an outstanding loan of up to Rs.25 crore and a business turnover of up to Rs.100 crore. A repayment tenure of 4 years along with a moratorium period of one year will be provided. The banks and NBFCs who have offered the loans will be provided with 100% creditguarantee cover on principal and interest. This loan is likely to benefit more than 45 lakh units and can be availed till 31 October 2020
  • A provision of subordinate debt worth Rs.20,000 crore will be provided by the Central Government to the MSME sector. The package is likely to benefit up to 2 lakh MSME units. Stress functioning MSMEs including NPAs and business short of capital can avail this debt to restart businesses. The Credit Guarantee Fund Trust for Micro and Small Enterprises (GTMSE) will also be provided support to the tune of Rs.4,000 crore by the Central Government
  • A Fund of Funds (FoF) worth up to Rs.10,000 crore will be set up by the Central Government. ThisFoF will be operated by a mother fund and few daughter funds. The fund structure is likely to provide a leverage of up to Rs.50,000 crore of funds at daughter funds level. This will also allow MSME units to get listed on the main board of major stock exchanges in India
  • The Central Government has disallowed global tenders in government procurement up to Rs.200 crore in order to improve Indian businesses

How to Apply for a Business Loan?

Step1: You can apply for a business loan through online or offline channels. A number of lenders, today, give prospective customers the option of directly applying for a business loan through their official websites. To apply for a business loan online, you will need to visit the lender’s respective website, click on the loan product that you wish to apply for, and click on ‘Apply Now’.

Step2: Upon doing so, you will be redirected to another webpage, wherein you will be required to key in certain details into an online application form. You may be asked to enter your name, age, contact number, city of residence, details about your business, etc.

Step3: Once you key in the required information, you can click on ‘Submit’ to submit the online application form. A representative from the bank/financial institution will contact you to take the loan application process forward.

Step4: You can also choose to visit the nearest branch of a bank or financial institution and directly apply for a loan through the branch. In this case, you will need to submit the loan application form along with the required supporting documents at the branch.

Step5: Once the lender verifies your loan application and documents, your application will be approved, after which the loan amount will be disbursed into your account.

Reasons to Take a Business Loan

There are multiple reasons for applying for a business loan. However, you should opt for this scheme only when:

  • You have a strong business plan
  • You foresee a decent cash flow in the future through the business
  • The capital return of your business is greater than the interest of the loan borrowed

Below mentioned are the circumstances under which you can take a business loan in order to meet your financial requirement:

  • While establishing a new business

    If an entrepreneur has a business idea that he or she wants to turn into an endeavour with potential income, a business loan can be availed in such a scenario to meet his or her financial needs. However, in order to ensure your loan gets approved, you should make sure that your idea is good enough to generate substantial profits in order to repay the loan interest. You should also make sure that the overhead cost of the business is not high enough to cause a negative impact on the business and its profitability.

  • For business expansion

    Opting for a business loan is a great way to arrange for the funds required during the expansion of an organisation. Business expansion can include starting a new department, launch of a new product, upgrading an operation or product, venturing a new area or market, etc. Additionally, the chances of loan approval for an existing business are usually high owing to the fact that it holds a proven track record.

  • To purchase machinery and equipment

    When dealing with a high-demand product, it is essential for the business to maintain a regular supply to the market. In order to do this, the organisation might have to increase production by investing in equipment and machinery with the latest technology. Furthermore, a company might also need to buy equipment during an expansion. Business loans are a great way to meet credit needs during such a situation.

  • To manage cash flow within the organisation

    It is difficult for small companies to ensure there is a healthy amount of cash flow within the organisation. Therefore, a business might face a shortage of money to fulfil its liquidity requirements for a working capital such as utility bills, overhead salary, inventory management, rent, etc. However, this problem can be solved if a business owner opts for a loan to meet the company’s temporary financial crisis.

  • Require working capital for business

    When the cash flow is low within an organisation due to reasons such as market boom and increase in operating cycles, it is difficult to manage regular expenses such as salaries, supplies, and raw materials. In order to keep the business running and to recover from such a financial crisis, an entrepreneur might decide to avail a business loan and keep the business operational.

  • To turn business losses into profits

    A business loan can also be availed to receive the funds required in order to make a business that has been incurring losses profitable. Even though many lenders are sceptical when funding a less successful/unsuccessful business, corporate applicants with a practical plan that includes major changes in business operations or introduction of a new product might convince them to do so.

  • To repay previous debts

    It is always a smart move to repay multiple small debts using a large loan in order to avoid paying a huge amount of money as interest. A businessman can also choose to do the same by availing a business loan.

  • While running a seasonal business

    If you are operating a business that is in demand only during a certain time of the year then it might be difficult for you to manage the expenses when the orders start rushing in. In that case, you can secure a short-term business loan to offer undisrupted service to your customers and can repay the loan using the profit earned after the peak season is over.

Types of Business Loan

A few types of business loans in India that you should know before applying a business loan.

S:NO Types Definition
1 Overdraft facility In an overdraft facility, the business owner can withdraw a larger sum than the amount present in the account as a loan to meet his or her business needs. The maximum amount that can be withdrawn and the interest rate under this facility is based on a mutual agreement between the lender and borrower.
2 Term loans In case of a term loan, a borrower can avail a secured or unsecured loan to receive the funds according to the situation and requirement of the business. These loans are helpful in acquiring long-term assets. There are three types of term loans based on tenure namely short-term loan, long-term loan, and intermediate loan that can be repaid on a monthly or quarterly basis. While the rate of interest for such loans can be fixed or floating, it varies according to the loan repayment tenure.
3 Demand loans When an entrepreneur withdraws a demand loan to meet the financial requirements of his or her business, the amount has to be repaid whenever the bank or non-banking financing company (NBFC) recalls it. Demand loans can be both secured and unsecured and are ideal to meet a short-term financial crisis. While the maximum term for this type of a business loan can be 12 months, the merchant can choose to renew it when the term has ended.
4 Loan against securities At the time of a financial crisis, a business can also decide to opt for a loan against its financial securities that are approved by the bank such as mutual funds, fixed maturity plans, insurance policies, savings bonds, demat shares, exchange-traded funds, etc.
5 Letter of credit facility This type of financing scheme can be availed by a business based on the creditworthiness of the buyer’s bank when the buyer and the seller do not know each other such as during international trade transactions. In this case, the bank pledges on-time payment to the seller after taking account of its origin certificate, insurance certificate, transportation documents, legal documents, and other commercial documents. However, if the buyer fails to make the payment, the bank is liable to pay the entire outstanding amount.
6 Cash credit facility The cash credit facility is an overdraft loan that can be availed by a business to finance its need for working capital by offering its current assets such as receivables, inventory, etc. as collateral. The maximum amount that can be withdrawn using this scheme is dependent on the stock margin fixed by the bank. The tenure of this loan can be renewed at regular intervals of 12 months.
7 Bank guarantee Whether you own a public/private limited company or proprietorship/partnership firm, you can avail this pre-approved secured loan by offering residential, commercial, or industrial property as collateral. This financing scheme helps companies secure down loans, buy the required equipment, or cover any additional costs that will help the organisation grow. In this kind of a business loan, the financing company promises to pay the stakeholders of the guaranteed business in case it defaults.
8 Business loans for women entrepreneurs In a bid to promote women empowerment, numerous banks and NBFCs offer special loan schemes to existing and potential women entrepreneurs. These exclusive schemes offer a lot of benefits and special discounts in terms of quantum of loan, interest rate, security, etc. Furthermore, female entrepreneurs can also benefit from the consulting, training, and counselling offered by several lenders to help them learn about various aspects of the market and industry. However, these loans are only available to women who hold more than 50% shares of a company.

Features of Business Loans

Before you choose to apply for a business loan to start a new business or expand the current one, you should learn about the features of a business loan.

  • The corpus for a business loan depends on numerous factors such as the amount of profit it makes annually, valuation of the business, and operating industry of the business in addition to the number of years it has been operational.
  • These loan applications usually get approved fairly quickly and sans any hassle during processing. Most banks and financial institutions provide their customers with the promise of secured lending solutions when it comes to business loans.
  • Since business loans carry flexible repayment options along with minimal documentation, they have become one of the most preferred ways for entrepreneurs to meet the financial needs of their businesses.
  • Unsecured business loans enable businesses to fund their exact exigencies and repay their loan amount in easy EMIs (equated monthly instalments). These loans can be availed for a variety of reasons, including but not limited to, business expansions, working capital, etc.
  • Banks and financial institutions offering business loans also provide their customers with the flexibility of doorstep service. Additionally, a number of business loan lenders in India usually don’t expect any collateral, guarantor or security from the applicant.
  • Some banks offer customers with the facility of business loan eligibility in 1 minute, either online or in any of their branches. These speedy approvals ensure that customers don’t waste any of their time waiting to hear from banks about the status of their loan application.
  • Business loans come with the added benefit of services such as SMS, Web Chat, Phone Banking, etc. Some banks even extend exclusive higher loan amounts to their self-employed customer base.
  • Thus, if you are in need of funds for business needs, make sure to compare your options and apply for a business loan at the earliest.

Things to Consider When Applying for a Business Loan

Listed below are a few points that you should consider before availing a business loan:

  • Work out how much your business needs: The quantum of loan offered by lenders to business owners/self-employed individuals is usually quite high. That said, it is necessary to assess your funding requirements and avail a loan that will help you fund your business requirements. It is best to not borrow more than what you require since the repayment may become a hassle.
  • Research the types of business loans: Many lenders offer more than one business loan as part of their product mix. These loans are likely to have varied terms, loan amounts, loan tenures, and repayment options. Further, select business loans may be specially catered towards certain sectors or segments of the society, thus helping individuals belonging to these groups avail either a lower interest or better terms. Hence make sure to do your due research about the various types of business loans that are available in the Indian market and make a choice accordingly.
  • Check your credit score: Your credit score indicates your creditworthiness. Individuals with a good credit score are considered less likely to default on their repayment. Lenders, thus, usually check your credit score before approving it. To increase your chances of being approved for the loan at an affordable interest rate, it is advisable to have a credit score above 750. Before applying for a business loan, make sure to check your credit score and take the necessary steps to improve your credit score, if necessary.
  • Understand the repayment terms: For business loans, the borrowed amount is, in most cases, repaid via Equated Monthly Installments (EMIs). Lenders usually take your repayment capacity into account and decide on a loan tenure and monthly EMI that is affordable. As an applicant, you should ensure that you understand your lender’s repayment terms. Make sure to not default on EMI payments since it can cause your credit score to dip.
  • Check the charges: Certain charges that are levied on business loans include the interest rate, processing fee, preclosure fee, documentation charges, part-payment fee, default fee, etc. Make sure to check the charges that are levied by different lenders and understand how they affect the cost of your loan.

The above-mentioned points are a few things that you should take into consideration when applying for a business loan. Also, it is in your best interest to compare at least a few business loans that are offered by different lenders and opt for one that suits your requirements.

FAQs on Business Loan

  1. What security should I provide to avail a business loan?

    No security or collateral is required in order to avail a business loan, in most cases, though a thorough evaluation of your documents would be needed to confirm that. If you are required to submit security or collateral, you can check the lender’s terms and conditions to know what is generally accepted.

  2. I am a doctor and have been practising for 10 years now. Can I get a business loan to set up my independent practise?

    Yes, business loans are offered to all practising professionals, subject to proof of qualification being documented.

  3. Will I be required to share my personal information to use the EMI calculator to calculate EMIs on my business loan?

    No, you will not be asked for any personal information while calculating your expected EMI. The EMI calculator only requires the loan amount that you intend to apply for, the tenure of the loan, and the rate of interest.

  4. For what purposes can I avail a business loan?

    You can apply for a business loan for any of the following or related purposes-

    • Small business finance
    • Working Capital finance
    • Home renovation
    • Business expansion finance
  5. How long will it take for me to find out if I am eligible for a business loan?

    Business loans usually are offered speedy approvals and most banks offer applicants with the convenience of business loan eligibility in 1 minute. This facility can be availed online or any of the bank’s branches.

  6. How much liquidity will be injected by the Reserve Bank of India (RBI) under the AtmarnirbharBharat Abhiyan?

    RBI will inject a total of Rs.3.74 lakh crore of which Targeted Long-Term Repo Operations (TLTRO) will be worth Rs.1 lakh crore. Cash Reserve Ratio (CRR) cut of 100 basis points to 3% of net demand and time liabilities worth Rs.1.37 lakh crore, and accommodation under Marginal Standing Facility hiked from 2% of Statutory Liquidity Ration to 3% worth Rs.1.37 lakh crore.

    RBI will also inject liquidity which will be 0.5% of the GDP out of which Rs.50,000 crore will be reserved for the second phase of TLTRO, and additional refinancing of Rs.50,000 crore by NABARD, SIDBI, and SHB.

  7. The turnover of my business is below Rs.50 crore. Am I eligible for a loan under Atmanirbhar Bharat Abhiyan?

    Yes, your business will be considered a small enterprise and hence you can avail investment of up to Rs.10 crore.

  8. Is there any moratorium period provided by the government for the payment of business loans?

    Yes, you will be given a repayment tenure of 4 years including a moratorium period of 1 year.

  9. The turnover of my business is Rs.80 crore. What type of business enterprise will my unit qualify as?

    Your business unit will be considered as medium enterprise and you can avail investment of up to Rs.20 crore.

  10. What are the criteria for a business to be considered a micro enterprise?

    The Central Government finally decided to alter the long-standing definition of MSMEs and increased the investment limit. As per the new definition, units with investments up to Rs.1 crore and turnover up to Rs.5 crore will be considered as micro enterprise.

  11. Will trade fairs and exhibitions continue to happen?

    No, trade fairs and exhibitions will not take place anymore. Infact, MSMEs will be provided with e-market linkage and will be promoted as a replacement for trade fairs and exhibitions. Fintech will be the tool which will be used in order to increase transaction-based lending by using the data generated by the e-marketplace.