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Business Loan Guide – How To Avail The Same?

business loan - YeLo

No business can run without liquid funds, even if some money is available to you for the business setup you still need funds to run it smoothly. And for that Business Loans are very prevalent today. Similar to other loans, a business loan is also a kind of cash borrowing or a debt that is needed to be paid back including the interest in the agreed period or loan tenure.

Today, almost all banks or non-banking financial institutions are offering business loans at a very lucrative rate of interest named as merchant cash advance, business cash flow or advance, micro-loans, asset-based financing, mezzanine financing, etc.

Everything has gone online from physical, i.e. you can easily avail of the business loan by applying the same through online platforms. The entire loan procedure is done online like from filling the application to document submission to amount disbursed, you don’t need to visit, physically, any branch or office, same like a personal loan.

Business Loan – How To Apply or Avail?

The steps include

  • Step 1: As we mentioned above, business loans can be applied in the same manner as we apply for personal loans, i.e. online as well as by physically visiting the branch. But applying online gives you the option to view all offerings at one single place, you don’t need to visit the individual branches one-by-one that requires a lot of time and is a tedious process too.

You can visit the individual lender’s website, select the business loan product, go through the terms & conditions, check other relevant details and if everything fits into your requirement click “Apply Now”.

  • Step 2: Once you click the “Apply Now”, you will be redirected to the online application form, where you need to fill the key details as a borrower. The details include the name of the applicant or borrower, age, gender, contact number, date of birth, residence address, business or office address, type or other details of the business, government-issued identity card, i.e. PAN or Aadhar, business PAN, etc. Ensure details provided by you should be of utmost correct as any small mistake can lead to application disapproval.
  • Step 3: Once you enter the required details, submit the application by clicking on “Submit”. A bank/financial institution representative or executive will contact you to process the loan application further.
  • Step 4: Many people still prefer visiting the branch or office to submit the loan application. In that case, just ensure you fill the application form correctly and carry all relevant documents with you for loan form submission; else you need to revisit the branch or office.
  • Step 5: Once the loan application is verified by the bank or financial institution along with documents, the application will be approved in 2-3 working days. Once the application is approved, the business loan amount will be disbursed to your account within 24 hrs.

Documents Required

  • Individual as well as company or firm Pan Card.
  • Company registration documents
  • Relevant KYC documents such as Pan Card, Driving license, Voters ID card, Passport, Aadhaar Card.
  • Residence Proof such as Driving license, Voters ID card, Passport, Aadhaar Card.
  • Last six months’ company and individual bank statement.

What Are Different Variants or The Types of Business Loans Available?

  • Professional Business Loan – As the name suggests, the professional loan is available to self-employed professionals such as CAs (chartered accountants), doctors, lawyers, etc. The credit history of the individual plays a significant role here just like a personal loan. The terms and conditions of the professional business loan vary from bank to bank or NBFCs to NBFCs. The applicant’s or borrower’s relationship also plays an important role here as if someone is banking for long with them, they consider exceptions in approval.

Sometimes, collateral is asked from the borrower in the form of bank’s term deposits, National Savings Certificates, mortgage of the house or non-agricultural land or any other property, etc. when the loan amount is high or above the threshold or borrower’s credit history is not good. Loan tenure is long in professional business loan, i.e. 5-8 years.

Eligibility Criteria & Documents Required for Professional Business Loan in India:,

Eligibility criteria are simple with minimal documents (as mentioned above), similar to a personal loan.

  • The borrower or applicant needs to be a resident of India.
  • He/she need to be a specific profession, such as Doctor, Architect, CA, Lawyer, Surveyor, etc.
  • He/she must be practicing the profession successfully for at least 2 years.
  • He/she must be a self-employed licensed professional i.e. must have a practice license issued by either state or central authorities or bodies.
  • He/she should be within the age of 21 to 65 years.
  • He/she must carry all qualification documents, i.e. professional degree.
  • Bank Guarantee If you are running a private or public limited firm or having a partnership or proprietorship firm, then also you can apply for a business loan. But it would be a secured business loan means you need to provide collateral in the form of residential, industrial or commercial property, bonds or cash accounts, stocks, etc. 

This business loan in the form of bank guarantees help the business owners to secure a good loan amount to run business smoothly by supporting operational activities such as buying necessary machinery or equipment, to buy raw material, to pay bills, for staff training, or any other additional expenses, etc. that are important for business growth. Collateral helps the banks of NBFCs to recover the outstanding loan amount in case of borrower defaults on payment.

  • Process To Avail Bank Guarantee

If you have any kind of asset that can be listed under collateral apart from liquid assets, then you can apply for Bank Guarantee. For this, an applicant needs to contact the respective bank and fill the application to apply for it. An applicant needs to provide all personal as well as business documents along with collateral papers.

Once the details and documents are verified, the application will be approved in the stipulated period i.e. 3-5 working days and the amount will be disbursed once the bank guarantee agreement signed between bank and borrower. All terms and conditions along with specific instructions on the payment or beneficiary will be mentioned in it.

  • Business Demand LoansIt is a most flexible, both secured and unsecured, business loan that can be withdrawn by the business owner to meet the financial needs of business exigencies. They are considered best to meet the short-term requirements of the business concerning the cash crisis. The maximum tenure is 12 months and can be renewed by the bank at the request of the borrower.

Documents required apart from the one that are mentioned above under business loans are

  • Business track record or financial health.
    • A Detailed report of income prospects or viability from the business.
    • Business balance sheet and other relevant financial records.
    • Non-encumbrance & title report.
    • Business valuation & inspection report.
    • Self-assessment or income proof.
    • Insurance papers with banker’s clauses.
  • Overdraft Facility Another supple business loan with the utmost ease. In this, a business owner is approved for a specific amount, as per the eligibility and mutual agreement between borrower and lender. An overdraft virtual account is created and the approved amount is kept in that, a business owner can withdraw the amount as per the needs of the business. Interest will be applied only on the withdrawal amount, not on the entire approved amount. Although the borrower needs to pay some fee for maintenance, as per the lender terms & conditions.
  • The Process to Avail the Overdraft Facility – As explained above overdraft facility allows the customer to withdraw the larger sum from their account. Many banks offer a pre-approved overdraft facility to many businesses as per their business performance or relationship with them apart from the formal application process.

Overdraft is also secured and unsecured as in the first collateral is pledged while the later is taken against the bank account only.

Nowadays it is much easier to avail of the personal as well as a business loan to meet the unavoidable exigencies. But one thing should be kept in mind that one should not apply for too many loans as it affects the credit history of the person or business as well as also creates a debt trap. As it might happen to clear one debt one has gone for another debt cycle that is difficult to manage.

Loans are a kind of extended help in the financial crisis or difficult times, so one has to take due diligence while applying for the same. It is good to do small planning to intelligently and make better use of them.

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