A business loan is a financial instrument that can be used to cover both unexpected and anticipated expenses. A business loan is borrowed money that businesses use to cover costs they can’t afford on their own in the short term.
The amount of the loan depends on the business’s nature, years of operation, and whether it is profit-making. Business loans can range from a few lakh rupees to several crores
Eligibility criteria
Business entities such as Self Employed professionals and non-professionals, Proprietorship Firms, LLP, Partnership Firms, Private Limited Companies may apply for a business loan
- Age of Applicant- Between 20 years to 60 Years
- A Good CIBIL Score – Above 700
- Years of Business Operation- Minimum 3 Years
- Business should show cash profits in the past two financial years
- Nationality- Indian
Some Types of Business Loans
Term loan
A short-term loan that can be used to start a business. The loan can be used for things like buying raw materials, improving cash flow, and hiring staff
Working capital loan
A loan that finances a business’s short-term operational needs.
Small Business Administration (SBA) loan
A low-cost, government-backed loan. However, the application process can take a long time
Merchant cash advance
A loan that provides cash based on card transactions. This loan is only available to businesses with a POS machine
Letter of credit
A credit limit that provides a funding guarantee to businesses that deal in international trade
Loan against property SME
A secured business loan that offers a low-interest rate. The applicant mortgages their property against the loan amount
Start-up loan
A loan for entrepreneurs who want to launch a new business. These applicants often don’t have a good credit history
Equipment Financing
With this loan type, the machinery is taken as collateral to secure the loan
Invoice Financing
The loan funds are provided against the invoices. As part of this loan agreement, the lender must clear off the debt when the payment is received. It is also popularly known as invoice factoring or invoice discounting.
Business Overdraft
A business overdraft is provided upon holding fixed deposits with a financial institution. When offering this facility, the lender analyses the business cash flow, repayment history, terms of fixed deposits and more.