While starting a business, it is important to have enough capital so that you can support your business. In many cases, business owners do not possess the required capital. As a result, many opt for a business loan. A business loan or an MSME loan can help business owners meet their capital requirements to successfully build and run their businesses. In this article, we will dive deep into everything you need to know about getting a business loan.
What is a Business Loan?
A business loan is essentially an unsecured loan that you can opt for to receive financial aid for your enterprise or business. You can utilize these funds for various business purposes such as expanding your workspace, meeting operational cost requirements, purchasing equipment and machinery, clearing your debts, hiring new talent, and scaling your business. Many banks and NBFCs offer business loans at competitive rates of interest. Depending on your requirements and financial repayment capability, you can pick a suitable business loan for yourself.
Eligibility Criteria For a Business Loan
To be eligible to apply for a business loan, you should meet the following criteria:
- Employment
You should be a self-employed individual.
- Age
To apply for a business loan, you should be between 25 and 65 years of age.
- Type of Business
Your business should be a private limited company, partnership, or limited liability partnership.
- Income Tax Return
You should have a minimum ITR of Rs. 1.5 Lakhs annually.
- Business Experience
You should have at least 3 years of business experience in the current business or 5 years of experience on the whole.
How to Obtain a Business Loan?
Here are 6 steps about how you can obtain your business loan.
- Start With a Business Plan
The most important part about obtaining a business loan is to have a solid foundation with a business plan. Banks and lending institutions would assess your business plan before granting a loan.
- Complete Your Financial Statements
Have your accounting team include all of the transactions into your company’s financial statements. Have your income statements, balance statements, and cash flow statements ready.
- Evaluate Your Personal Credit History
It is recommended to assess your existing credit score as it can help banks assess your creditworthiness. If you have a high credit score, it is more likely for banks to consider you to be a reliable applicant.
- Identify Your Collateral Capacity
Business loans beyond a certain amount of capital requirement would need collateral to be submitted as a form of security. Make sure you have all your collateral details laid out.
- Be Clear About Your Loan Amount Requirements
It can be beneficial for you to clearly state the reason behind opting for a business loan including the amount of loan you would require.
- Consider All Financing Alternatives
While opting for a business loan, make sure that you pick a bank or lending institution whose offering aligns with your needs.
Final Thoughts
Now that you know what is required to apply for a business loan, make sure that you have all the requirements ready. You can apply for a business on Finserv MARKETS and experience many benefits such as minimal documentation, flexible repayment tenure, and attractive interest rates.
