Business Loans: Everything You Should Know
Every small business and start-up begins with a beautiful idea. The next move is to find the money. Applying for Loans is the simplest way to acquire cash while starting a business. The term ‘Business Loan’ is specifically designed for businesses. It could be starting a new business, expanding an existing one, purchasing machinery, or meeting urgent needs. Lenders approve the loan amount depending on the needs of the firm.
Interest Rates
Banks offer Business Loan interest rates that go up to 16% for Loans up to Rs. 2 crores, for which the repayment term is five years. Borrowers need not present any collateral or security for the Unsecured Loans.
The Loan for Business is not for free. Lenders impose interest rates as a cost of borrowing money. You should choose between fixed and variable rates. A fixed-rate remains constant during the Loan tenure and its payback period. A variable interest rate means the rates might change depending on numerous factors. Another aspect to consider is the repayment period and how the lender will use the collateral if the firm cannot repay the loan on time.
Eligibility
The following people can apply for a Business Loan:
- Self-employed people, proprietors, private limited companies, and partnership firms in manufacturing, trading, or providing services.
- The annual revenue of the company should be at least Rs. 40 lakh.
- Those who have been in the current business for at least three years and have five years of business experience.
- Those firms who have earned a maximum profit for the past two years
- The company’s minimum annual income should be Rs. 1.5 lakh per year.
- The applicant must be at least 21 years old when applying for the Loan and up to 65 years when the loan matures.
Documents Required
- PAN Card of the company, firm, or individual.
- ID proofs
- Address proofs
- Bank statements for the last six months
- The latest ITR and computation of income, balance sheet, and P&L account for the last two years.
- Proof of continuation (ITR/Trade License/Establishment/Sales Tax Certificate)
- A valid copy of the Memorandum and Articles of Association.
Conclusion
Entrepreneurs, by definition, can take chances to make their dreams a reality. While applying for a loan to start a business from scratch may appear challenging, solutions and resources are available to help comfort and motivate small business owners and future entrepreneurs to take the plunge. Before opting to get a Loan for Business, make sure to research efficiently concerning Loan types and Business Loan interest rates.