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How Do You Get a Business Loan in India?
A business loan helps you to get significant financial assistance required for your business operation. Being a credit without any tag of end-usage restriction, you can leverage your borrowed capital for any purpose that suits your business needs.
The online application process makes the credit facility much more straightforward and faster. Whatsoever, you must know how you can correctly apply for this credit to reduce chances of rejection.
✔️ Steps for Getting Business Loan in India
Following are some steps that you should follow to meet your financial requirement for running the business operations:
Step 1: Find Suitable Lending Institutions
There are several lending institutions in India from which you can get a business loan. However, you should shortlist lenders among all those considering the interest rate, applicable processing and other charges, penalties, etc. This will help you avoid lenders that can substantially increase your cost of borrowing.
Step 2: Check the Eligibility Requirement
After shortlisting lenders, you need to check their eligibility parameters. Before requesting credit from a particular lender, you need to ensure that you meet all the basic eligibility standards. Else, you may need to encounter an unnecessary rejection of your credit request.
Step 3: Apply for the Business Loan
You will have to visit your chosen financial institution’s official portal and find the business loan application form. Fill it in carefully by entering the required personal, residential and business details. Mention the loan amount and preferred tenure as asked in the application form. After all these, you will have to submit this duly-filled application form.
Step 4: Complete the Documentation Process
You need to provide photocopies of all the required personal, income, residential, and business proof. The lender carefully undergoes all these records for verification purposes.
Step 5: Sign on the Loan Sanction Letter
Upon verification, the lender approves the credit requests. They also issue and send a loan sanction letter. You need to sign this and send a copy back to your lender. This sanction letter contains various information about the credit, including the total loan amount, applicable interest rate, tenure, charges, repayment schedule, etc. You need to carefully read all these before putting your signature on the paper.
Upon completing all these steps, the lender will process your loan and send you the requested credit amount at the earliest.
✔️ Eligibility Criteria for a Business Loan in India
Here are some basic eligibility parameters you need to meet to qualify for the business loan:
- You need to be a self-employed professional (doctor, lawyer, etc.) or non-professional (manufacturers, traders, etc.)
- Your age must be between 25 and 6 years
- The minimum business vintage required for the business loan is 3 years
- Your minimum annual income should be Rs. 1.5 Lakhs
Note: These eligibility parameters are subject to vary across lending institutions
Although a high CIBIL score is not a mandatory eligibility parameter, a poor credit score below 685 can lead to the rejection of your credit request. So, before you apply for a business loan, you need to ensure that you have a decent credit score. You can check credit scores online free of cost from the website of some major financial institutions or by directly logging into the website of credit bureaus.
✔️ Documents Required During Business Loan Application Process
Following are some documents you need to provide while applying for the business loan:
- Identity Proof: PAN card, voter ID card, passport, etc.
- Address Proof: PAN card, Aadhaar card, electricity bill, agreement of lease
- Income Proof: ITR statement
- Bank account statement for at least the last 6 months
- Declaration of a sole proprietorship or partnership deed
- Profit and loss statement and balance sheet of your business for the past 2 years
✔️ Your financial institution may also ask for additional documents if necessary.
You should also be aware of the common mistakes that individuals usually commit while applying for a business loan.
✔️ Common Mistakes to Avoid While Applying for a Business Loan
Here are some of the common mistakes that you need to avoid:
- Not Reading the Loan Terms
✔️ You need to go through the terms of your loan, including the interest rate, charges, repayment tenure, EMI, type of interest rate (fixed/floating), etc., properly. Else, you may face difficulty in repayment, or the borrowing cost may increase.
- Lack of a Business Plan
✔️ The lending institution may ask you to give a brief about how your business will generate revenues. If it is not convinced, it may not give you the loan or agree to lend only a lower and ultimately insufficient amount.
- Unawareness of the Eligibility Parameters
✔️ By checking the eligibility parameters, you can surmise whether you will get the loan from a particular lender. If not, you can request credit from another financial institution.
✔️ The online application process for applying for a business loan is quite simple. You just need to access the concerned application form and enter details as asked. This process lets you avoid the time and effort of reaching the physical branches of your lender.
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Posted By-Govinda Rauniyar
Criteria for a Business Loan, Criteria for a Business Loan, Steps for Getting Business Loan Steps for Getting Business Loan, Eligibility for Business Loan
FAQ About Business Loan In India ?
A business loan in India is a financial product offered by banks and financial institutions to entrepreneurs or businesses to provide them with the necessary funds for starting or expanding their business operations.
To be eligible for a business loan in India, the applicant must be an Indian citizen and should have a valid business plan with a clear idea of the market and competition. Additionally, the applicant should have a good credit score and should not have any past defaults on loan payments.
The maximum amount of a business loan in India can vary depending on the lender, but it can typically range from a few lakhs to several crores, depending on the business’s financial needs and creditworthiness.
The interest rate for a business loan in India can vary from lender to lender and depends on factors like the loan amount, tenure, and creditworthiness of the borrower. Generally, business loan interest rates in India range from 10% to 25%.
The documents required to apply for a business loan in India can vary depending on the lender, but generally, the following documents are required: proof of identity and address, proof of business ownership, financial statements, income tax returns, and bank statements.
