Operating and expanding a business demands a lot of capital which may not always be available to entrepreneurs. So, to fund their endeavours, entrepreneurs prefer business loans.
For business loans, the applicants must follow certain criteria to get a loan from the top lending institutions. Usually, business loans are simple to obtain and take less time to disburse. Still, you should check your business loan eligibility before applying.
In this article, you will learn about the eligibility criteria, benefits, and documents required for a business loan. So, let’s get started.
Main Reasons to Get a Business Loan
There are various reasons for funding your business. Here is why people prefer obtaining a Business Loan.
Large Loan Amount
SME business loans up to Rs 50 lakh are easily available. Business Loan Interest Rate for SMEs are low and provide immediate financial assistance for short-term or long-term business needs.
Rapid Disbursement
Business loans get approved within a few hours of application verification. What could be better than getting funds for your business right when you need them? Business loans are quick and straightforward to obtain.
Collateral-free Business Loans
There is no need to have your assets appraised to obtain credit for your SME business. When you check the business loan eligibility, you will discover that there is collateral required for taking small business loans. It means you won’t have to put up an asset as collateral for the loan.
Establishes a Credit History
You can quickly establish your credibility and improve your chances of obtaining large-scale finance in the future by taking out short-term small business loan. Good credit history can assist you in getting larger amounts of loans.
Eligibility Criteria for a Business Loan
The business loan eligibility is as follows:
- You must be a resident of India
- You must be between 21 to 65
- Your business should be in operation for a minimum of three years
- You should have a minimum turnover of Rs 1 crore
- Your business should have a CMR score of up to 6 and CIBIL score of 700 & above
However, your loan approval depends on several factors, including your credit score, income sources, tax payment timelines, etc. You must also submit the updated Business Loan documents to facilitate approval.
Documents Required for a Business Loan
You should have all the documents required for a business loan and a completed application form. The required business loan documents include the following:
- Completed application form
- IdentityID Proof (self-attested copy of any of the following documents):
– Passport
– Pan card
– Driving Licence
– Voter ID
– Aadhaar Card - Address Proof – a self-attested copy of any of the following:
– Ration Card
– Passport
– Bank account statement
– Driving Licence
– Aadhar Card
– Electricity / Telephone Bill - Income Verification – a self-attested copy of the relevant documents
– The most recent ITR
– Audited financials
– Account statements for the previous six months - Business Evidence – a self-attested copy of the relevant document
– Qualification Certificate/Practice Certificate
– Shop Act License
– MOA or AOA
– Registration for Sales Tax or VAT
– Partnership Deed
Considerations When Applying for a Business Loan
Business Loans can be approved for a wide range of small, medium, and large businesses and professionals with the following conditions:
- Having a good credit score
- Use caution when selecting a loan provider, as each one has their requirements
- Keep an eye on your finances; they should be audited frequently
- Before applying, consider different loan repayment terms
- Submit only one loan application at a time
Conclusion
A business loan helps entrepreneurs fund expenses primarily related to day-to-day operations, expansion, growth, or marketing of their businesses. The primary goal of a Business Loan is to provide quick funds, allowing the business owner to support their pressing needs, such as business expansion, meeting working capital requirements, purchasing business assets, and staff expansion. A Business Loan helps give your venture the boost it needs to thrive.
About the Author
Amaira Sharma is finance expert and former business growth strategist who has more than 8+ years experience in the industry, now she helps others to get better financial stability and standards. She loves to write useful tips on personal finance and businesses.