Financial Flow is the life blood of any successful organisation. Most businesses will need a large amount of working capital to start up a new business or enable the rapid growth of an existing business. Scaling up always requires an influx of finances.

All types of businesses such as sole proprietorships, partnership firms, privately held companies, retailers, and self-employed individuals can avail these loans. Regardless of whether you are planning to expand your business or start a new venture, the banks will come to your rescue. Several financial institutions offer loans to start a new business. The banks and other financial institutions offer term loans and Flexi loans to suit the needs of the borrower.

Types of Business Loans

Here’s all about different types of business loans: 

1. Term Loan: A term loan is availed generally for capital expenditure. This loan could be a secured or unsecured loan. The unsecured term loan ranges for a period of 1-5 years whereas the secured business loan is for 15-20 years.

2. Working Capital Loan: It’s majorly taken to meet the day-to-day operations of the running business. It helps in balancing the cash flow that’s required to run a business. A working capital loan is mostly opted for by manufacturers, wholesalers, service providers, retailers, and export and import traders.

3. Loan against Property for SME: These loans are given to businesses whose loan requirement is more than 50 lakhs. The applicant has to mortgage the property to avail this loan. The loan can go up to 70% of the current market value of the property. The loan tenure is up to 15 - 20 years based on the policies set by the financial lending institution. 

4. Start-Up Loan: As the name suggests, a start-up loan is generally offered for new business ventures. There must be an established business and the applicant must submit proof of the business existence and registration. This loan can be easily availed as they are provided without any security or collateral. The other striking feature of a start-up loan is that if there’s a loan default, the company can be liquidated to repay the dues. 

5. Equipment Financing: This loan is exclusively for manufacturing businesses as they would recurrently need equipment and machines. Usually, heavy machines are expensive and to purchase this equipment, heavy investment is required. The interest rates are lower for equipment financing when compared to term loans.

6. Business Loan for Women: There are exclusive business loans for women to encourage them to start new businesses. The Government of India also has initiatives to support women in small and medium-sized businesses. Women can avail of flexible loans, start-up loans, discounts on the standard interest rates, and a faster loan process. 

Features and Benefits

• Fixed Interest rate: The interest on business loans is fixed, usually between 14-24% a year. As the interest rate is constant throughout the year, the borrower can plan investment and business operations wisely. 

• Flexible Repayment Tenure: It is an attractive feature that helps businessmen to plan the repayment tenure based on his/her financial conditions.  

• Collateral free loans: One can avail best business loans without any security or collateral loans. You do not have to pledge any asset to get a start-up business loan. 

• Loan Amount: An individual can avail maximum loan of up to 50 lakhs.  

• Minimal Paperwork: An individual can also apply for online business loans by visiting the respective website. It requires minimal paperwork. 

Who can avail Business Loan?

Following entities can avail the business loan

• Proprietorship

• Partnerships

• Private Limited Companies

• Limited Liability Partnerships

• Limited Companies

Documents Required for Loan Application 

Here’s a list of general documents required for business loans:

• Proof of business

• IT return statement of last 3 years

• Bank account statement of last 6 months

• KYC documents of co-applicant

• Residential proof

• Identity cards such as PAN card, Voter card & Aadhar card

• Proof of ownership of possessions uses in business