A business loan is a financial instrument, where funds are utilized exclusively for business purposes.
Right from the moment entrepreneurs think of any business idea, the need for fund arises. In the later stages, as business grows, there is an inevitable need of financial assistance for..
- 1. Business Expansion
- 2. Inventory Procurement
- 3. Buying New Office or Warehouse
- 4. Purchase/Upgrade Machine & Equipment
- 5. Closure of Loan running at Higher Interest Rate
- 6. Increase Working Capital & Many Others..
More often than not, business owners are short of financial resources. Hence, they need additional funding in form of business loans for various purposes.
Factor Affecting Business Loan Eligibility
One of the major benefits of Business Loan is that generally lenders do not require security, hence making it unsecured loan. The business loan eligibility is affected by several factors such as:
- 1. Audited Financials
- 2. Future Growth Prospects
- 3. Annual Turnover & Profit Level
- 4. Existing List of Creditors & Debtors
- 5. Credit Score & Past Repayment History
Basic Documentation For Business Loan
- 1. Identity Proof : Aadhaar Card, Passport, Voter’s ID, Driving License etc.
- 2. Address Proof : Electricity Bill, Telephone Bill, Lease Agreement, Sales Tax certificate etc.
- 3. PAN Card : of business entity and/or proprietors/partners/directors/promoters.
- 4. Financials : Latest Income Tax Returns, Audited/ CA Certified Balance Sheet and Profit & Loss account for previous 2-3 years.
- 5. Updated Bank Statements : of Previous 6 months to 1 year.
- 6. Other Documents : GST Certificate, Establishment Certificate, Articles of Association (AOA), and Partnership Deed among others.
(Please note: Above mentioned is a generalized list of documents. Actual documentation requirement might vary as per lender, funding needs as well as your profile & industry.)
Tips For Getting a Business Loan
Here is the list of 5 tips, which greatly enhance your chances of business loan approval:
- 1. Prepare a good business plan
- 2. Identify risks that lenders assess
- 3. Talk About Your Current Business Projects
- 4. Maintain a Good Debt Service Coverage Ratio
- 5. Understand the Requirements & Process of the Lender
(Related Article : 8 Common Business Loan Mistakes You Should Avoid )
Source of Business Loan
- 1. Traditional Source : Banks, Non-Banking Finance Companies (NBFCs), Angel Investors, Specialised institutions (EXIM, SIDBI etc) & Micro Finance Institutions.
- 2. New Age Lenders : Fintech like CapitaWorld offers Term Loan and Working Capital Loans digitally. You can apply for a business loan from anywhere on this platform. It enables you to track your proposal online. Moreover, you will get free knowledge center support.
Applying for a business loan and applying for an individual loan are altogether two different things. In business loans, the process is more stringent with the higher involvement of paperwork.
So, every entrepreneur must understand the process thoroughly before arriving at any decision. You should compare various factors including processing fee, EMI payments, prepayment charges, and foreclosure charges among others before availing a loan.
If you need quick and hassle-free loans, then Apply for a Business Loan Online from CapitaWorld today!
CapitaWorld is a Unique Fund Raising Platform which is created as a one-stop solution for all your loan requirements (Home Loan, Personal Loan, Loan Against Property, Business Loan etc).