Business Loan

OVERVIEW

Business Loans are unsecured in nature and can be taken for the purpose of business expansion. The ultimate aim of providing business loan is to fulfilling the dreams of entrepreneurs. If you are planning to expand your business, or starting up a new enterprise, MANTRA will provide you multiple options to resolve your financial needs. Startups can also apply for business loan. The criteria to avail such a loan are quite different than the loan taken for already running business.

FEATURES AND BENEFITS OF BUSINESS LOAN

  • Multipurpose Loan: Business loan as the name suggests is a loan taken to fulfill business related dreams and needs. As such one can take business loan for a variety of purpose such as funding your working capital, purchasing or updating machinery, paying to creditors and so on. The business loan works as a perfect financial aid in such situations.
  • Attractive Lending Rates: Since this loan is designed to fulfill the needs of businessmen and entrepreneurs, most lenders offer loans at affordable interest rates. The interest rates start from anywhere around 11.50% onwards.
  • Collateral Free: Since business loans come under the category of unsecured loans therefore you do not require to keep anything as a security or collateral to fund your business.
  • Flexible Repayment Facility: Business loans comes with flexible repayment options for borrowers. Most lenders offer repayment tenure up to 48 months.
  • Loan Amount: For business loans, a borrower may be offered loans up to Rs. 75,00,000 which is a good amount to fulfill your business needs.

PURPOSE OF TAKING BUSINESS LOAN

Why should you choose a Business Loan?

If you are a businessman or an entrepreneur, business loan can help in a lot many ways in fulfilling your business needs. Here we are listing some reasons why you can take a business loan:

  • To increase Cash Flow of your business.
  • If you are planning for business expansion.
  • For purchase, repair or upgrade equipment/machinery.
  • To increase stock/inventory.
  • Hire and pay salaries to employees.
  • Pay off creditors.
  • Purchase raw material.
  • Opening up new plants.

BUSINESS LOAN TYPES

In INDIA, there are different types of Business Loan designed to cater different needs of businessmen and entrepreneurs.

  1. Loan for Working Capital: During your business, if at any point you fall short in your working capital then this loan would help you to maintain a healthy cash flow to sustain and fund your daily operations.
  2. Loan for buying machinery and equipment/ Machinery Loans: With the help of this loan you can purchase or upgrade to latest machinery, equipment or plant and ensure your business’ smooth working. Usually the cost of purchase or repair, replace or upgrade machinery is too high. In such scenarios, taking up a business loan would help in meeting the cost of purchasing, repairing or upgrading machinery. 
  3. Business loan by government/MSME loans: To boost economy and encourage businessmen and entrepreneurs, the government of India has launched schemes to provide financial aid to them. One such scheme is Pradhan Mantri MUDRA Yojana (MUDRA- Micro Units Development and Refinance Agency) under which government provides loan between Rs.50,000 to Rs.10,00,000 to encourage entrepreneurship under the MSME Sector.
  4. Business loan for women: This loan is designed especially for women entrepreneurs, women who dares to break the stereotypical ideology that business is not the cup of tea for women. To boost and encourage women and give wings to their business, many lenders in India offer business loans to women at comparatively lower interest rates, low processing fee and with no collateral requirements. In this type of loan any business woman or entrepreneur is eligible to take a loan up to Rs. 50,00,000 with interest rates starting from 12% onwards.

WHO CAN AVAIL BUSINESS LOAN?

Self- Employed Professionals: Doctors, CA, CS, architects, engineers etc.

Self Employed Non-Professionals: Traders, Commission agents, contractor etc. 

If you apply as a company following are the categories:

Partnership/Proprietorship 

Limited Liability Partnership

Private Limited Companies

ELIGIBILITY CRITERIA

Here are the eligibility criteria that are common to most Banks & NBFC’S

Borrower’s Age                                  21  to 65 Years
Business Vintage Proof                                         Min 1 Year (Profit)
Business ProfileSelf-employed individuals, Proprietors, Private Ltd. Co, Partnership Firms involved in the business of manufacturing, trading or services. 
IncomeEnterprises making profit for the past two years and with a minimal annual income (ITR) of Rs. 2 Lakhs.
Loan Amount                                                      Starting from Rs. 50,000 to Rs.75,00,000.
Loan Tenure                                                         ranges from 5 to 7 years
Interest Rates ranges from 9.10 to 36%
Processing Feegenerally ranges from 1% to 3% of the loan amount + (GST)
Credit Score                                                          700+ (subject to different bank policies)

DOCUMENTATION

Identity ProofAadhar card/Passport/Driving License/Voters ID/ PAN card /Passport size photo 4  
Residence ProofPassport Any utility bills Adhar Card Rent Agreement Voter ID Card Ration Card Driving License  
Bank StatementLast 6 months to 1 year
Income Documents Copy of Income tax return of previous 2 years with balance sheet, profit and loss account, audited by CA.
Proof of ContinuationShop Establishment Certificate (GUMASTA) Trade License Certificate Factory Registration Certificate GST Registration Certificate Udyog Certificate Tin Number
Additional DocumentsComputation of income (CA Certified) Audited balance sheet Assets account Capital account Profit & loss account   Recent bank statement of 6 months.   PAN card requirement for Companies/Firm/Individuals.   If a loan is in progress then its entire statements.   Duly signed and filled business loan application by the applicant.  

DO’S AND DON’TS OF BUSINESS LOAN

Here are some points of do’s and don’ts of business loan including what you should and shouldn’t do before applying for your loan and after receiving it.

DO’s DONT’s
1.You should make your banking strong and healthy as much as you can.1.Don’t spend too much on things which are beyond to your limits. For Example, you should only cover your general business purposes and therefore can’t be used for personal expenses.
2.Before you go to a lender always do your research work and compare products from different lenders available in the market.2. Don’t put your assets at risk.
3.You should provide right documents at right place at the right time.  3.Don’t apply to multiple lenders at a time as it will badly affect your credit score. 
4.Before applying for business loan, it is essential to know your business cash flow- i.e. the combination of your business income and outgoings. This will boost profit and will help you to repay your EMIs timely.
 
4.Also don’t take more than one loan at a time as extending your debts can put your business at risk.
5.Clear your dues on time. If you don’t repay your EMI’s on the given period of time, then your credit score could be at risk, which may impact directly to your loan application.5. Do not be in a hurry to foreclose your loan as lenders also charge for foreclosure.    
6.Make sure you have completed all documents formality before applying for loan.