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Business loan is the primary unsecured form of financing, intended to meet the day-to-day business needs of enterprises or business owners. There is no obligation on borrowers to have any collateral or security to borrow unsecured business loans. The loan can be used for business expansion purposes, purchase raw materials, manage cash flow, hire/train staff, buy equipment/machinery, upgrade inventory and much more. There are no minimum loan limit requirements for borrowing.
The following benefits and features come with business loans that make one opt for the same.
No Collateral/Security Required:
You don’t need to provide any collateral or security to get a business loan, which is unsecured in nature.
The best part of a business loan is that it gives you time to settle the dues. You will get a flexible loan tenure ranging from 1 to 5 years.
Instant Loan Approval & Disbursal:
If you have the required income, ideal credit score and repayment ability as requested by lenders, the loan can be approved instantly. After reviewing your income and credit profile, the lender sanctions the loan amount and communicates the same via an email or SMS. After signing of loan agreements with the lender, the sanction process will begin and the amount will be disbursed to your bank account.
The prepayment means payment of the balance of the outstanding loan before the original tenure of the loan is completed. It now depends on the lender whether it allows you to pay in full or in parts beforehand.
The verification and documentation process has now become brief in today’s digital world. For a business loan, this is applicable as they are quick to disburse and require minimum approval documents.
Business loan eligibility criteria differ from lender to lender. Following are the eligibility criteria for business loans that most banks and NBFCs expect their borrowers to meet before sanctioning their loans.
The age should be between 21-65 years.
Sole Proprietorship, Partnership firms, LLP, Trust, Public And Private Limited Companies.
750 or above with a good credit history
Business Existing Tenure:
The business should have at least 3 years of business existence.
You must own either a residence, office, shop or godown (warehouse).
Note - The eligibility criteria explained above can vary from one lender to another.
When applying for a business loan, don’t forget to submit the below-mentioned documents required by the lender.
1. KYC documents of applicants, partners, co-applicants
2. PAN Card of Business (other than proprietorship firm)
3. Business Registration and Vintage Proof
4. Bank Statement of business for last 1 year
5. Income Tax Returns and Financials for last 3 Years
6. Latest GST returns of 1 year
7. Mandatory Documents:
– Certified true copy of Memorandum, Articles of Association which must be certified by Director and original copy of Board resolution In case of Company
– Certified Copy of Partnership Deed In case of Partnership
– Sole Proprietor Declaration In case of Proprietorship
– Certified Copy Of Deed In case of LLP
|Interest Rate||17-24% Interest Rate (depending on several factors including location, net income, business stability, collaterals, existing monthly obligations, etc.)|
|Loan Amount||Up to Rs. 50 Lakhs*|
|Loan Tenure||12 months to 60 months|
|Processing Fee||Differs from bank to bank; generally ranges between 1-3% of the loan amount|
|Lock-In Period||Varies from lender to lender|
|Preclosure Charges||Differs; Generally between 2%-5% of the loan outstanding|
|Guarantor Required||Varies on different conditions|
The business loan process involves three steps:
Step 1: Submit relevant documents that prove your income, identity, tax, age, and address. After the submission of the documents, the verification process begins by the lender.
Step 2: In the verification process, the lender will check whether you are eligible for the loan or not. If you pass the eligibility criteria set by the lender, your loan will get sanctioned. Otherwise, your application will get rejected.
Step 3: After signing of the loan agreement with the lender, the loan amount will be disbursed to your bank account.
For a specified time period, a business loan is issued and this time period is known as the loan repayment tenure. You are supposed to pay off the debt after you have taken out a loan by the end of the tenure of the loan repayment through EMIs. However, if you plan to pay off your loan prior to the expiration of the loan repayment period, it is called pre-payment or foreclosure.
There are 2 types of repayment. They are full pre-payment and part pre-payment.
Full Pre-Payment: You pay off the entire unpaid loan balance before the expiration of the tenure of the loan repayment.
Part pre-payment: You pay off a part of the entire unpaid loan balance before the end of the loan repayment tenure.
Tie-ups with Banks/Financial Institutions: We have formed alliances with numerous banks and financial institutions.
Unbiased Expert Advice: We take pride in offering unbiased advice to our customers regarding business loans and other products. Our specialists use their knowledge of the market to inform you which lender is best for your cause.
Hassle-free Process: You don’t have to worry about visiting banks numerous times to check the loan application status. We handle all the process and keep you in the loop to ensure that you get the updated information.
No Hidden Costs: We don’t charge any fees to the borrower.
Attractive Cashbacks: Receive cashback and vouchers when you are applying for a loan through us.
Step 1: Fill the eligibility form
You must complete the eligibility form in the first step, which involves filling in the following details:
Full Name (As per PAN Card)
Current Residence Pincode
Type of Business
Desired Loan Amount
Gross Annual Sales/Turnover
Gross Annual Profit
Annual Net Profit
Type of Bank Account
Step 2: Select from the multiple offer(s)
Based on the information you provided in Step-1, you will be given a list of lenders by our representative. Pick the lender that you wish to go ahead with from the list. But, please remember to consider the following points when picking the lender:
Interest rate offered
Step 3: Apply for the loan
In this step, you have to give detailed information about your business details and bank details.Once you submit your loan application, our representative will contact you to cross verify the details before sending the application to the selected lender.
Let’s see an example of a business Loan to understand better:
Formula used for calculating loan: E = P x r x (1 + r) ^ n / [(1 + r) ^ n - 1]
E is the EMI.
P is the principal or loan amount.
r is the rate of interest (calculated monthly.
n is the tenor (calculated monthly).
You have a business loan of Rs. 20 lakh at 17% rate of interest for 4 years. As per the above formula, your EMI will be:
EMI= 20,00,000 x 17%/12 x (1 + 17%/12) ^ 4 / [(1 + 17%/12) ^ 4 – 1]
The below comparison table contains popular business loans along with their processing fees, loan amount, and interest rate:
|Lenders||Interest Rate (p.a.)||Loan Amount (Max.) in Rs.||Repayment Tenure (Months)|
|Bajaj Finserv||19% onwards||20 lakh||12 – 48|
|IDFC First Bank Business Loan||19% onwards||75 lakh||12 – 60|
|Fullerton Finance||17% onwards||50 lakh||12 – 48|
|HDB Financial Services Ltd.||22% onwards||30 lakh||12 – 60|
|HDFC Bank Business Loan||15% onwards||75 lakh||6 – 48|
|Hero FinCorp||18% onwards||25 lakh||12 – 36|
|ICICI Bank Business Loan||16% onwards||40 lakh||6 – 48|
|IIFL Finance||18% onwards||50 lakh||12 – 36|
|Indifi Finance||18% onwards||50 lakh||12 – 36|
|Kotak Mahindra Bank||16% onwards||75 lakh||6 – 48|
|Lendingkart Finance||17% onwards||1 Crore||3 – 36|
|NeoGrowth Finance||24% onwards||75 lakh||6 – 24|
|PaySense Services India Pvt. Ltd.||18% onwards||5 lakh||3 – 36|
|RBL Bank||19% onwards||20 lakh||12 – 36|
|Tata Capital Finance||18% onwards||30 lakh||12 – 36|
|ZipLoan Business Loan||18% onwards||5 lakh||6 – 24|
What security should I provide to avail a business loan?
In order to make use of a business loan, no security or collateral is needed in most situations. But, a detailed review of the records will be required to confirm that. If you are needed to submit security or collateral, you can check the lender’s terms and conditions to know what is generally accepted.
How long will it take for me to find out if I am eligible for a business loan?
Typically, business loans are offered speedy approvals, and most banks offer borrowers in 1 minute with the ease of eligibility for business loans. This service can be used online or at any of the branches of the bank.
For what purposes can I avail of a business loan?
A business loan can be used for growing current business operations, working capital requirements, purchasing inventory, raw materials, expansion of business, etc.
Can I reduce EMI on a business loan?
If the bank provides part pre-payment or full pre-payment, you can lower your loan EMI. Most banks allow 6-12 EMIs for pre-payment after repayment, and some banks allow only 1 EMI after repayment. So if you have a surplus sum and want to reduce your EMI burden during the loan term, you can easily opt for pre-payment of the loan.
Does it affect my co-applicant if I default on a business loan?
Yeah, if you fail to pay the loan on time, it will also affect your co-applicant, as his/her CIBIL rating will also be affected by the default loan.
How much time does it take for a business loan to get disbursed?
After all the necessary documents are submitted, the business loan disbursement can take approximately 15 working days. Some banks and NBFCs can give you an in-principle approval subject to verification of documents submitted by you and the results of their field visits. In this case, the loan disbursement process can also be as short as a week.
What is the repayment period of a business loan?
The minimum repayment period is 12 months and the maximum repayment period is five years; however, it may exceed up to 6 years in some exceptional cases.
How secure is my information?
For Rupayloan, data security is of utmost priority. All of your data is kept strictly confidential and secured.
Can I get an instant business loan with a 750 credit score?
Ans. Of course! If your credit score is 750 or above is considered by any financial institution.