For any organisation, working capital is the most important factor that keeps its business alive and running. Working capital is the lifeblood of any successful venture. Business organisations need large amounts of funds in order to kickstart a new venture or to expand an existing business. One of the best solutions for raising short-term working capital for existing Business owners is a Business Loan and that too without giving any additional security.
Purpose:
The amount raised from the Business Loan can be used to:
♦ Fund your existing working capital requirement
♦ For buying new machinery and other capital goods
♦ Make additional capital available for your business needs
♦ Expansion of business operations
♦ For purchasing new equipments
Maximum Loan:
♦ Banks generally lend upto 50lacs as Business Loans which is unsecured.
Maximum Term:
♦ Upto 3years Business loans are normally available. In exceptional cases the tenure can be extended to 5 years.
Rate of Interest:
♦ Business Loan interest rate starts from 15% on the lower side and go upto 21% depending on the Borrower profile and Bank policies
Click here to know about the latest Business Loans Interest Rates…
Click here to Quickly check your Business Loans Eligibility....
Loan Against Property eligibility depends upon various factors. A few of them are listed below:
Business Income:
Your income determines the amount of loan you are eligible for. Banks generally keep an EMI to Income ratio at 50% to 60%.
A stable business is preferred, meaning there should be signs of growth for the last 3 years. Sustained revenues and billing along with profit, act as cherry on top for loan applicants. If your total business experience exceeds 5 years along with good results in the stipulated tenure then that makes you a good business loan applicant.
For Business owners, income shown in Annual Income tax returns is usually considered. There are other income eligibility calculation methods also like Gross Turnover, Banking Surrogate, Existing EMI track record, GST method and so on.
Existing Loans:
In case you are paying EMIs on existing loans, then the Business Loans eligibility amount will come down to keep the EMI to income ratio at 50% to 60%.
Credit History:
Banks also check credit history of a borrower from CIBIL which stands for Credit Information Bureau India Ltd. It is a repository of information, which contains the credit history of commercial and consumer borrowers. CIBIL provides this information to its members in the form of credit information reports. Individuals can also access their own credit reports from CIBIL. For more information refer www.cibil.com
Generally a Credit Score of 700 & above is considered GOOD. Many Banks these days are following CIBIL Score based Interest Rates, which means - Better your CIBIL Score, Better Interest Rate you will get!
To check your Cibil Score & get Report click here...
How do I know my eligibility? - Click Here
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Secured Business Loans:
♦ Secured Business Loans are taken by giving some security of a personal asset like Inventory, Gold, loan against property etc.
For more information on Loan Against Property click here.
Unsecured Business Loans:
♦ This page contains detailed information about unsecured business loans without any collateral or security. These loans also reduces your dependency on relatives, friends or acquaintances for short-term loans.
Various types of documents are required to submitted for a Business Loan Application:
♦ KYC Documents
♦ Income Documents
♦ Bank Statements
♦ Existing loan details
♦ Property Asset details
Generally the documents required are almost similar across all Banks; however they may differ with various banks depending upon specific requirement etc.
Interest and other charges paid towards a Business Loan is a usual business expenditure and is allowed as a deduction from the borrower’s business income while filing his Income tax returns.
Under Section 37(1) of the Indian Income Tax Act: Borrower can claim tax exemption from a Business Loan if the loan amount is utilized for Trade/Work/biz purposes. In these cases, benefits can be claimed against interest paid and associated fees and charges incurred. These payables can be claimed as business expenses.
Acquiring a Business Loan doesn’t only involve the monthly interest but it also includes other charges and fees at various stages of taking the Business Loan. You must consider all these charges while comparing the cost structure across banks. Following is the detailed fee structure incurred by banks at different loan stages:
Before Loan Disbursement:
Processing Fees:
♦ It is a fee payable at the time of submitting the loan application to the bank, which is normally non-refundable. The fees charged can range between 2 - 4% in most Banks and NBFCs.
Insurance Premium:
♦ Few Banks also insist Borrowers to get the Business loan insured against Critical illnesses, Business losses or untimely death of the Borrower. On most occasions the insurance premium is added to the loan amount itself which increases the EMI to a certain extent.
After Loan Disbursement:
Cheque Bounce charges:
♦ Banks charge between Rs.250 - 500 + GST for every bounced cheque towards the loan payment because of lack of funds in your account.
Delayed EMI Penal Interest charges:
♦ When there is a delay in the payment of your EMIs, Banks charge a Penal interest rate on the amount due which is much higher than the regular LAP interest rate, ranging from 2% to 3% of the amount due.
Prepayment / Foreclosure Charges:
♦ When the borrower prepays the loan before the loan tenure, banks charge a penalty which can go upto 5% of the principal outstanding amount.
