BUSINESS LOAN: WE LEND TO SEE YOUR BUSINESS GROW
When you want to launch a startup, start a small business or need to buy any equipments, lack of capital can stop you from doing any of it. In such situation, getting financial assistance can help be a great help for you. This creates the need of business loan.
A business loan can be defined as a loan for business purposes, either for starting a new business or expanding the existing one. A business loan is mostly an unsecured loan but it can be both, secured or unsecured loan.
ELIGIBILITY FOR TAKING A BUSINESS LOAN
You are eligible for applying for a business loan if:
- You are a limited or Private Limited Company
- You are a partnership or Proprietorship Firm
- You are self Employed Professionals (SEP) like chartered accountants, allopathic doctors, company secretaries and architects who are practicing their profession.
- You are self Employed Non Professionals (SENP) like traders and manufacturers
- You should be 21 years of age or more and less than 65 years at the time of maturity.
- Your minimum Annual Income should be Rs. 1.5 Lakhs p.a.
- You have minimum Turnover of Rs. 40 Lakhs.
- You have been in current business for 3 years or more and the total business experience should be at least 5 years.
- Your business must be making profit for the last 2 years.
- You are other constitution types depending on their profile on a case to case basis.
Documents that you need to submit for business loan
- Application form
- PAN Card – For Company /Firm/ individual.
- Proof of identity like Aadhaar Card,Passport,Voter’s ID card,Pan Card,Driving License etc.
- Proof of address like of Aadhaar Card, Passport, Voter ID-Card, Driving License etc.
- Bank Statement of last 6 months.
- Income details like Income tax returns, Form 16A, balance sheet etc.
- Business vintage for 5 years
- Business proof: Certificate of practice.
- Other Mandatory Documents (Sole Prop. Declaration Or Certified Copy of Partnership Deed, Certified true copy of Memorandum & Articles of Association (certified by Director) & Board resolution (Original).
TYPES OF BUSINESS LOAN:
There are a few types of business loan as per the needs of different businessmen. Here is a small discussion of types of business so that you can choose which business loan suits you best:
- Bank loan : You get this loan from the bank at a fixed rate of interest. This loan can either be secured(by providing a collateral which the bank can claim in case the borrower is not able to repay the complete amount in time) or unsecured(without any collateral).
- Mezzanine finance : In this type of loan, the lenders give money to the borrower at a condition that if the borrower doesn’t repay the full amount in given time, the lender can ask for part-ownership of the business.
- Asset-based finance : In asset based finance, the lender gives money to the borrower against the business assets. In this, the quality of the collateral is more important than the credit profile of the borrower.
- Invoice finance: Invoice financing means that you can get a loan by showing the invoices or bills that customers still have to pay.
Applying for a business loan
Application for a business loan can be submitted either online or offline. If you want to apply online,you can can visit the website bankuponus.com and fill up the application form online after checking your eligibility and the documents which will be required.
Or you can visit the nearby lender and apply for the business loan there with the help of the representatives.
A few things to keep in mind while applying for a Business Loan
Here are a few reasons why your business loan could be rejected:
- If you are a startup: Banks usually lend money to those business owners who have at least a few years’ experience in the industry, where most of the startup owners have no experience of being in the industry. So there are chances that your business loan could be rejected if you are a startup owner.
- Excluded industry: Lenders do not give loans to business owners in every industry, they choose industries which can generate profit easily. In case you are in an industry which is not in the list of the lender’s eligible borrowers, there are chances that your business loan application will be rejected.
- Cash flow problems: Cash flow indicates that your business is generating enough profit. If there are any cash flow problems, the bank is going to get an idea that your business is not generating any profit which means that you will not be considered capable enough to repay the loan.
- Not enough collateral: The lenders will want to ensure that you will be able to make the full repayment of the loan in the given tenure. For that the would prefer that you provide a good collateral. This ensures the bank that you will make the payment on time and if you don’t, they can claim the property or asset that you provided them as collateral.
- Having low credit score: Having a good credit score increases your chances to get a business loan. Though there are organizations which lend money to business owners even without looking at their credit scores, but it is better that you maintain good credit scores and history.
- Personal guarantee: By personal guarantee we mean that you promise the lender that you will repay the loan even if your business is not doing good. If you are not ready for this commitment, the lender will not trust you enough to lend you the money.
- Under capitalization: There is no organization which is going to lend you 100% of your needs. They will definitely want your contribution too. If you are a startup, most of the lenders will expect you to contribute at least 30% and if you are in an existing business, the lender usually expects you to contribute at least 20% of your cash needs.
These are a few things which, if you keep in mind, can increase the chances of approval of your business loan. So make sure that you are eligible and you have all the required documents ready with you before applying for a business loan.