Starting a business in India can be an exciting and rewarding experience, but it often requires a large amount of capital to get started. Whether you are starting a small business or expanding an existing business, obtaining financing is critical to your success. In this article, we will discuss how to get a business loan in India, business loan kaise le and how to get it approved easily and successfully.
Starting a business requires a lot of capital investment. Many entrepreneurs struggle to secure the necessary funding, especially when they are starting out. Fortunately, there are many options available for availing a business loan, so we are here to explain the process of availing a business loan for you so that you can easily raise capital for your business. And can ensure its future growth.
Leading Banks for Business Loans
- State Bank of India (SBI)
- HDFC bank
- ICICI Bank
- axis Bank
- Kotak Mahindra Bank
- Punjab National Bank (PNB)
- Bank of Baroda
- Canara Bank
- Indian Bank
- IDBI Bank
Step 1: Determine what type of loan you need
Before applying for a business loan, you need to determine what type of loan best suits your needs. There are several types of business loans available in India, including working capital loans, term loans, equipment loans, commercial loans and business lines of credit.
- Working capital loans are ideal for businesses that need money to cover daily expenses such as payroll, rent and utilities.
- Term loans are ideal for businesses that require funds for a specific project or for the purchase of a prime asset.
- Equipment loans are designed for businesses that require funds to purchase machinery or equipment.
- Commercial loans are generally used for large projects or acquisitions.
- Business lines of credit are flexible loans that allow businesses to borrow money as needed.
Step 2: Determine Your Eligibility
Before applying for a business loan, you must determine your eligibility. Lenders will evaluate your credit score, business revenue and other financial factors to determine your eligibility for the loan.
Your credit score is an important factor in determining your eligibility for a business loan. Lenders will review your credit score to determine your creditworthiness. A good credit score can increase your chances of getting a loan and improve the terms of the loan. A score of 700 or above is considered a good score for availing a business loan.
Building a strong business credit profile – Before applying for a business loan, it is important to establish a strong credit profile. This includes maintaining a good payment history, keeping your credit utilization ratio low, and regularly reviewing your credit report for errors. It’s also important to keep your personal and business finances separate, as lenders will often look at both when evaluating your application.
Your business income is also an important factor in determining your eligibility for the loan. Lenders will want to see whether your business generates enough revenue to repay the loan. A healthy cash flow can also improve your chances of getting a loan.
Step 3: Choose a Lender
Once you have determined your eligibility and the type of business loan you need, it is time to choose a lender. There are several options available for availing business loans in India, including banks, non-banking financial companies (NBFCs) and peer-to-peer (P2P) lending platforms.
Banks are the most traditional source of business loans in India. They offer a range of loan products, including working capital loans, term loans and business lines of credit. However, the loan application process can be lengthy, and banks usually require extensive documentation.
NBFCs are an alternative source of business credit in India. They offer more flexible loan products and have a faster loan application process than banks. However, they charge higher interest rates and fees as compared to banks.
P2P lending platforms are another alternative source of business loans in India. They allow businesses to borrow directly from investors, bypassing traditional lenders. P2P lending platforms usually have a faster loan application process than banks and NBFCs. However, they charge higher interest rates and fees.
Step 4: Collect the Required Documents
Once you have chosen a lender, you will need to collect the required documents to apply for a business loan. The documents required may differ depending on the lender and the type of loan you are applying for. However, there are some common documents required while applying for a business loan:
Documents Required for Business Loan
In India, the documents required for a business loan may differ depending on the lender and the type of loan you are applying for. However, here are some common documents that you may need to submit:
- Identity Proof: Any ID Proof issued by the Government like Aadhaar Card, PAN Card, Passport, Driving License etc.
- Address Proof: Any address proof issued by the Government like Aadhaar Card, Voter ID, Passport, Driving License etc.
- Business Registration Proof: Incorporation Certificate, Partnership Deed, LLP Agreement, GST Registration Certificate etc.
- Bank Statement: Bank statement of your business account for the last 6-12 months.
- Financial Statement: Profit and Loss Statement, Balance Sheet and Tax Returns for the last 2-3 years.
- Business Plan: A detailed business plan that includes the nature of your business, revenue projections and financial projections.
- Collateral Documents: If you are applying for a secured loan, you will need to provide collateral related documents like property documents, insurance papers etc.
- Any other document requested by the lender: Some lenders may require additional documents such as supplier agreements, purchase orders, etc.
It is important to note that specific requirements may differ depending on the lender, so it is always best to inquire directly with the lender about their specific requirements for a business loan.
Step 5: Apply for Business Loan
After collecting the required documents, it is time to apply for the loan. The application process may differ depending on the lender. However, here are some common steps in the business loan application process:
- Fill the loan application form: You will need to provide information about your business and the loan you are applying for.
- Submit the required documents: You will need to submit the required documents along with your loan application.
- Wait for the lender’s decision: The lender will evaluate your loan application and documentation. They may request additional information or documentation if necessary. The appraisal process can take several days to several weeks, depending on the lender.
- Get Loan Approval: If your loan application is approved, you will receive a loan offer outlining the loan amount, interest rate, repayment tenure and other terms and conditions.
- Accept the loan offer: If you agree to the terms and conditions of the loan offer, you will be required to sign the loan agreement and return the loan amount to the lender.
- Receive loan amount: Once the loan agreement is signed, the lender will disburse the loan amount to your business bank account.
While preparing your loan application, make sure that you have all the necessary documents in hand including your business plan, financial statements, tax returns, and any other relevant documents. It is also a good idea to have a clear understanding of how much money you need and how you plan to use it, as well as a well-defined repayment plan.
Step 6: Repay the Business Loan
Repayment Options for Business Loans – In India, business loans usually come with various repayment options. Some of the common repayment options available for business loans in India are:
- EMI (Equated Monthly Installment): Under this option, you will be required to repay the loan amount in fixed monthly installments which will include both principal and interest components. The EMI amount is calculated based on the loan amount, interest rate and repayment tenure.
- ECS (Electronic Clearing Service): This is an automated system where the EMI amount is directly debited from your bank account on a fixed date every month.
- Postdated Cheque: You can provide postdated checks to the lender for the entire loan amount, and the lender will deposit them on the due date.
- Bullet Repayment: This option involves repaying the loan amount in a lump sum payment at the end of the loan tenure.
After receiving the loan funds, you will be required to repay the loan as per the agreed repayment schedule. It is important to make loan payments on time to avoid defaulting on the loan, which can negatively impact your credit score and future loan applications.
Getting a business loan in India can be a challenging process, but it is possible with the right preparation and planning. It is important to determine what type of loan you require, evaluate your eligibility, choose a lender, collect the required documents and apply for the loan. Once you have received the loan amount, it is important to make timely loan payments to avoid defaulting on the loan. With these steps, you can secure the funding you need to start or grow your business.