How to get a Business Loan in India?
In India, the process of getting a business loan is quite easy as long as your business is legitimate and you have the necessary documents supporting that legitimacy. Every business is unique and requires only a specific type of loan. Financial institutions nowadays provide a customized business loan that would be suitable for the kind of business you own. The criteria for validation of authenticity vary for different financial institutions. On approval, the respective financial institution has the authority to provide a loan of an amount considered worthy to them based on the scope and goal of the business. However, most financial institutions have a threshold amount beyond which they would not be able to provide. There is a certain interest rate range, processing fee range, and tenure range that are all interlinked to each other.
To get a business loan in India from a financial institution, you need to first make sure that you qualify for a business loan. Here are the basic criteria you need to follow:
- Applicant age must be over 25 years and under 65 years.
- There must be a minimum business experience of 3 years in current business and 5 years in total business experience
- There must be an accurate book of accounts which is a true representation of the company’s accounts and shows the ability of the borrower to repay the lender
- Ensure tax returns are paid on time
- Ensure you have a good credit score as the owner of the company as it reflects positive financial record
- Business must be in a profitable state for the past 2 years
If you qualify based on these basic criteria then you can apply for a business loan. The financial institution may provide you with a business loan on their own terms. Here are a few steps to be followed when applying for a business loan :
- Choose the financial platform from where you want to get a loan for your business. Always go for one that is well-renowned since trust plays an important role here.
- You should have clarity when explaining why you want a business loan. A good reason could be an expansion in terms of gear, tech, etc. A bad reason could be the acquisition of trivial resources, recovery from debt, etc.
- Estimate how much money the business needs. If you are a small independent business then always start small
- Fill out an application form providing your name, address, contact details, identification details, PAN card number, loan amount, legal status, etc. along with necessary documentation
- The financial institution will then see if it can be approved and intimate you on the same
There are a few basic documents that are required which must adhere to the details provided in the application form. The basic documents required while availing a business loan are the following:
- Identity Proof – This is to prove that you and the applicant are the same. It could be your PAN card, Aadhar card, passport copy, driver’s license, and voter’s ID
- Address Proof – This is to prove that you live in the same place provided in your loan document. It could be the same documents mentioned for identity proof except for PAN card, as your PAN card doesn’t have your address details.
- Bank Statement – This should be for a minimum period of 6 months from the time of application to show that you have don’t have a propensity to default on your loan
- ITR Statement – This is to show that you are paying your taxes
There are many financial service providers in India. These could include banks, money lenders or online digital platforms. The difference between the two is that most banks provide higher interest and are comparatively harder to qualify compared to other online financial institutions.
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