Is a lack of funds stopping you from expanding your company? Do you want to start a venture on your own? Applying for a business loan may just be the perfect solution for you.
Here are some questions you need to ask your lender on how to get a business loan.
- Am I Eligible for the Loan?
Before going ahead with any application process, it is vital to know the business loan eligibility requirements. For a business loan in India, you have to fit into one of these categories: Limited or Private Limited Company, Partnership or Proprietorship Firm, Chartered Accountant, Doctor, Architect, or another Self-Employed Professional.
- What is the Loan Application Process Like?
Once you submit an online application form, your request will be processed by the bank. You would be further asked to submit certain documents for verification, pertaining to both your personal and company details. You would then get an offer letter from the bank letting you know the loan amount you are qualified for. When you’ve worked out the finer details with your loan officer, you will have to pay a processing fee for the loan to be sanctioned.
Financial Institutions like Bajaj Finserv guarantee a 100% instant approval for unsecured Business Loans through the online application process.
- What are the Documents Required for a Business Loan?
Depending on the amount and the type of loan you have applied for, you would have to submit and verify certain documents before being accepted as an ideal candidate by the bank. The following is a list of some of the important documents:
- Application form
- Income details which include IT returns, P/L account statement for the last 2 years with Annexure and Form 16 A
- Bank account statement for the last 3 months
- Proof of business vintage over the past 5 years
- Business proof i.e. certificate of practice
- KYC of co-applicants
- Does My Business Vintage Fit the Bill?
When you apply for a business loan, business vintage is taken into consideration when estimating the repayment capacity of the candidate/company. A minimum of 3 years is required for limited and private limited companies, and that figure goes up to 5 years for partnership and proprietorship firms.
- Do I Need to Put up Any Security?
It depends on the bank and the loan amount you apply for. For an amount ranging from 5 lakh to 30 lakh, some banks will just inspect your credit score and income details; you don’t have to put in additional security. Financial Institutions like Bajaj Finserv do not ask for any collateral when you apply for a Business Loan.
When you apply for a bigger sum, you would have to put up collateral in terms of business inventory, saving accounts or deposits, and so on.
- Do I Require a Business Plan?
Banks like to minimize their risks before each loan sanction. Though they don’t ask for a detailed business plan, letting them know how you plan on investing the money builds trust.
- What is the Rate of Interest?
Business loan interest rates would depend upon the amount of loan and tenure. But it is ideally between 17%-22% of the loan amount.
- How Flexible is the Repayment Process?
Paying a stipulated amount of money, monthly, for the entire tenure of the loan isn’t always financially feasible. Having the option of repaying in bulk when you have easy access to idle funds reduces the accumulation of EMIs and saves the money you would otherwise spend on interest. A Flexi Loan is one such product by Bajaj Finserv where you can pre-pay money in hassle-free transactions.
- What are the Charges Involved During Application?
Apart from the application form, you will be charged for the following:
- Processing fee: 1.5%-2% of the amount of loan you applied for. It will be deducted at the time of disbursal of the approved loan.
- Secure fee: A convenience fee of INR 2000/- is charged when you apply online for a business loan.
10. Is There Any Penalty for Defaulting on the Loan?
Sometimes things can go wrong and you can be late on your payment. When this happens, some banks charge a penalty in the subsequent month’s EMI.