All you need to know about the Business Loan in India

Credit is of paramount importance when it comes to the better health of your business. Everybody needs credit for the achievement of their goals. A Business loan is befitting when it comes to getting finances for your business goals. MSME loans assist the sector to grow and increase its efficiency and output. Business loans in India are being encouraged by the government so that more MSMEs can drive the country's economic growth. There are various types of bank loans for businesses.  

In this article, we will explain to you the types of business loans and the application procedure.  

Types of business loans

MSME government business loan scheme  

• MSME business loan is a working capital loan. A working capital loan assists the working capital needs like inventory management, cash flow, and other operational needs. You can get a loan up to Rs.1 crore. 3% of reservation is available for women entrepreneurs. The rate of interest is 9.75% according to the State bank of India.
• Equipment business loan If you are planning to buy new equipment for growing your business, you may use an equipment loan. It will cover the price of new equipment. Banks use the equipment as security for providing loans.  

MUDRA scheme

• Set up by the government, Micro Units Development and Refinance Agency (MUDRA) fund the SMEs and startups. Under this scheme, public and private sector banks provide loans to MSMEs operating in the manufacturing, trading, and services sector.  
• CGTMSE Business Loan Credit guarantee fund government business loan scheme provides credit to MSMEs without security. You can get up to Rs. 10 lakh of credit under this scheme. It has provisions for bigger sanctions with the condition to mortgage your business assets and land.  
• Professional Business loans Banks provide loans to self-employed professionals like chartered accountants, Doctors, and Engineers who own small firms or enterprises. 

Qualification for a Business loan 

To qualify for a Business loan in India you must meet certain criteria- 

• You must be an Indian citizen 
• You must be a self-employed individual 
• Your age should be between 26-66 years 
• Your business should be 3 years old 

Documents – That are necessary for a business loan in India 

• Identity proof 
• Address Proof 
• Last 3 years ITR, Balance sheets audited by a CA. 
• Bank account statement of the last 12 months 
• Certificate and Proof of business existence 
• Business profile 
• Office address proof 
• Ownership/lease/rent agreement/utility bill 

How to apply for Business loans? 

All public and private sector banks and other financial institutions provide Business loans. You can easily apply for online business loans on the websites of the banks. Visit the official website of the bank or lender and fill out an online application form for a business loan. The online business loan application is then reviewed by the bank. If the bank finds you eligible, the loan lending procedure will start soon from the bank.  

Improve your chances of getting Business loans? 

If you are planning to apply for a business loan, you need to prep up. You need some preparations before contacting banks for business loans. These steps can boost your chance of approval- 

• A solid business plan 

You need to assure the lender about your business plan. A well-planned business strategy explaining the goals clearly enhances your chances to get approval. The lender may consider you a low-risk borrower and approve your business loan without hassle. 

• Credit score 

If you are planning to take a business loan, try to maintain a high credit score. The higher the credit score is more are the chances of getting higher loan amounts.  

• Research 

Compare MSME business loan offers by different lenders. Study well and opt for the right offer that meets your requirements. Beforehand research reduces the risk of rejection for a business loan.  

FAQs 

• How much loan can I get to start a business in India?  

The maximum amount of business loan that can be availed of will depend on the lender and other factors such as the annual turnover of the company. Under the Mudra Loan, up to Rs.10 lakh can be availed by a startup.  

• How much loan can I get for a small business?  

Most banks and lenders offer up to Rs.75 Lakh to small businesses. Their repayment tenures are up to 60 months.  

• Which bank is best for business loans in India? 

SBI, HDFC, RBL, ICICI, AXIS, are best for an online business loan. According to the websites of the banks, they charge the lowest interest and minimum processing fee. Their repayment options are also easy on the pocket.