How To Apply For A Business Loan Online – Its Types, Features & Eligibility Criteria
A business loan is a borrowed capital from a financial institution for the purpose of growing or expanding a business. Entrepreneurs and established businesses could apply for a business loan from a lender of their choice. This loan, also known as a commercial loan, is used to fund various requirements of the business.
A business loan is an ideal helping hand for businesses in need of working capital. It helps kick-start the business and enhances production and drives expansion. Many financial institutions offer business loans. Read on to know the features, types, interest rates, eligibility criteria, documents required and how to apply for a business loan.
How to Apply for a Business Loan Online
The steps to apply for business loans are as follows:
- Step 1: Determine your need
- Step 2: Verify your credit score
- Step 3: Click on the ‘Apply Online’ option
- Step 4: Fill out the business loan application form accordingly
- Step 5: Enter your name and phone number to generate OTP
- Step 6: Enter your personal information
- Step 7: Upload the necessary documents
- Step 8: You will receive an ID for tracking the status of your loan
- Step 9: An executive will call you to inform you about the loan
- Step 10: The lender will verify and approve your loan
- Step 11: After verification, the lender will contact you to inform you about the guidelines of the loan
- Step 1:2 After final approval, the loan amount will be credited to the borrower’s account within a few days
Types of Business Loans
Here are the different types of business loans you could choose from-
- Term Loan: A term loan is the most commonly used business loan that’s either secured or unsecured. Term loans are subdivided into two kinds – short-term and long term loans. The time interval for repaying term loans ranges between 1 year and 5 years for short terms. At the same time, it extends up to 10 years to 20 years in the case of long-term.
- Start-Up Loan: Start-up loans favour newly established business enterprises. Sometimes, borrowers fail to maintain a good credit score due to inevitable situations. In such cases, the applicant’s personal credit profile will be checked by the lender. Also, the business should be established with good turnovers, which helps the lender decide the interest rate, loan amount, tenure, etc.
- Working Capital Loan: Plenty of business houses take up working capital loans to fulfil their day to day requirements, like increasing production and sales, gathering raw materials, expanding the business, improving cash flow, stock enhancement, hiring workforces, etc.
Normally these loans are available in short terms alongside a reimbursement period of 12 months. Moreover, a borrower can avoid the headache of paying securities to the bank while opting for the loan. Due to this, the interest rate of a Working Capital Loan turns out to be more than general loans for businesses. - Letter of Credit: Many lenders or financial institutions offer a Letter of Credit to business organisations as a commercial instrument. They are the credit limits required by every business organisation involved in international trade. Business persons obtain its benefit for import and export. Nevertheless, a business firm will require payment assurance before signing the agreement. Therefore obtaining help from a letter of Credit will decipher this problem.
- Business Loan for Women: Nowadays, the gradual entry of women into the business field made several financial institutions provide a special credit facility to women called Business Loans for Women. Besides, the Government of India encourages women across the nation to join businesses. Some features of Women’s business loans are start-ups loan available, discounts on interest rates, flexible eligibility, etc.
Business Loan Interest Rates
The rates of interest offered by the Indian Banks are discussed in the following table:
| Name of Bank | Interest Rate (p.a.) |
| HDFC Bank | 11.90% p.a. to 21.35% |
| Axis Bank | 14.25% – 18.50% |
| State Bank of India (SBI) | As per lender |
| Kotak Mahindra Bank | As per lender |
| Fullerton India | 17% p.a. to 21% (floating) |
| Standard Chartered Bank (Business Instalment Loan) | From 17.25% |
| Karnataka Bank | 9.41% |
| ICICI Bank | From 18% |
| Bajaj Finserv | From 17% |
| IIFL Finance | 11.75% to 25.75% |
Calculate Your Business Loan EMI
Loan Amount
Rate of Interest (P.a)
%
Loan Tenure (Months)
Monthly EMI
0
Total Interest
Total Amount
Also Read: What Is A Small Business Loan? Benefits, Types And Other Features
Features of Business Loan
- Collateral or Security-Free
- Flexible Usage
- Flexible Time Interval
- Simple Documentation
- Fast Transaction
Business Loan Eligibility Criteria
For a successful loan borrowing experience, you have to fulfil the lender-specific eligibility parameters. These include:
- The applicant’s age must be between 21 years to 65 years at the time of applying for a loan and at the time of loan maturity, respectively.
- Self-employed persons, Sole-Proprietors, Private Sector Companies, and Partnership Firms having a production and services business.
- The minimum turnover of the business should be Rs. 40 lakhs
- Individuals must be involved in the present business for at least 3 years, alongside a minimum of 5 years of total experience in the business field.
- Business making profit for the last 2 years or more
- The minimal Annual Income (ITR) of businesses must be Rs. 1.5 lakhs per annum
Also Read: All You Need To Know About Availing A Business Loan Without ITR
Documents Required for a Business Loan
The documents required to apply for a business loan are:
- Photo ID proof (includes Passport-sized photos, Aadhaar Card, PAN Card)
- Address proof (Ration Card, Voter ID Card, Driving License, and Passport)
- Income proof (includes salary proof, income tax returns, bank statement)
- Bank statements (A copy of the last six months of bank statements)
- Age proof (includes Passport, Aadhaar Card or Voter ID Card)
- Business proof documents (includes Trade License, Sole Proprietorship Declaration, Income Tax Returns for last two years, Partnership Deed, Sales Tax Certificate, Profit and Loss Statement and Balance Sheet for the last two years)
- Other documents (includes Sole-Proprietorship Declaration, Partnership Deed, a certified copy of Articles of Association and Memorandum and Board Resolution)
Also Read: Personal Loans For Business: Process, Eligibility, Documents Required, Features, And Advantages
Final Word
A business loan is a powerful financial tool that offers commercial support to business enterprises. Often, businesses suffer from various drawbacks. During this time, they require adequate financial support. With the entrance of commercial loans, it becomes much easier for business enterprises to heighten their trade and secure their future. Compare the interest rates of various banks and NBFCs before you apply for a business loan and fulfil your start-up dreams.
FAQs
Ans: Yes. Previously, women didn’t get much support when it came to commercial activities. But at present, specialised business loan facilities are available for them due to their ongoing entry into the business world.
Ans: The modes of making repayments are available in two ways. Payments can be made two days a week or each month. Moreover, no additional charges are added to a commercial loan.
Ans: At present, you can avail of a loan amount of up to Rs 50 lakhs. The amount will be computed on the basis of earnings, credit score, bank statements, etc.
Ans: One of the vital requirements for availing of a business loan is having a good credit score. If your credit score is 750 or more, you can easily take a loan. However, if this score decreases to less than 700, then there may arise a question regarding the approval of your loan.
Ans: The drawback of business loans are:
– Not every business qualifies for the loan
– The application process is complicated
– Comprises processing fees
– Fixed repayment plan
Disclaimer
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
