29 November 2024
Business loans are just like fuel for an engine in a business, without which even the very best might crawl. A Business Loan is primarily meant for budding entrepreneurs who wish to grow, expand, or manage the operations of their business, a startup or an established entity, or any other type of business- it helps finance working capital, purchase equipment, or support any other critical business need.
In this guide, we will explore the different types of business loans available in India, the required business loan documents, and the eligibility criteria you need to consider while applying for them.
Different types of businesses require different types of business loans. For this purpose, business loan documents are essential. Lenders require your specific documents to assess your eligibility and credibility. Before approving the loan, lenders often analyze the viability and future of the business.
Below is the list of the documents commonly required when you are applying for a business loan:
Document | Requirements |
---|---|
Identity Proof | PAN Card, Aadhar Card, Passport, Voter ID |
Business Proof | GST Registration, Business License, Trade License |
CIBIL Score | Minimum 650 CIBIL Score for the majority of loans |
Financial Statements | Balance Sheet & Profit & Loss Accounts statements of the past 3 years |
Income Tax Return (ITR) | ITR filed of the business as well as the owner of the past 2-3 years |
Bank Statements | Bank Statements of the business for the last 6-12 months (preferred) |
Bank Statements | Bank Statements of the business for the last 6-12 months (preferred) |
Collateral | Property or any other assets in case of secured loans |
Check your business loan eligibility criteria, such as how much funding you can receive, using the Ambit Finvest Business Loan Eligibility Calculator.
There are various types of business loans available depending on the nature of the business and the funding it needs. Below are some of the commonly used business loans in India.
A Secured Business Loan is a loan that requires the borrower to provide collateral (assets like property, machinery, etc.) to the lender. The loan amount is usually higher, and the interest rate is lower than unsecured loans due to the reduced risk for the lender.
Secured business loans generally require assets that can be used as collateral. These could include real estate properties, machinery, inventory, or other business assets.
An Unsecured Business Loan does not require any collateral. The loan is granted based on the business's creditworthiness and the borrower's financial health. The terms, however, may be stricter, and interest rates may be higher.
Small business loans, especially for SMEs (Small and Medium Enterprises) and MSMEs (Micro, Small, and Medium Enterprises), play a vital role in supporting the Indian economy by fostering growth and innovation. These loans can help businesses manage daily operations, invest in technology, or expand their reach.
An SME Loan is designed for small and medium-sized enterprises. These loans provide the necessary capital for growth and innovation in various sectors. The government has also introduced various schemes to provide financial support to SMEs, aiming to boost the economic development of the country.
The MSME Loan is a government-backed initiative that provides financial support to small businesses in India. These loans help businesses access working capital and expand their operations, with lower interest rates and easier repayment terms.
Micro Business Loans cater to the smallest of businesses, typically offering lower loan amounts. These loans are critical for small entrepreneurs or individuals looking to start a business with limited capital.
Microloans offer financial relief for small-scale entrepreneurs, allowing them to start or grow their businesses. They are easier to qualify for and come with lower interest rates and more flexible terms.
Here's a Business Loan Document Checklist to help you understand the documentation needed for various types of loans:
Loan Type | Required Documents |
---|---|
Working Capital Loan | Bank statements, financials, ITR, business proof |
Term Loan | Business registration, financial statements, collateral |
Startup Loan | Business plan, ITR, bank statements, proof of ownership |
Equipment Loan | Equipment details, financial statements, collateral |
Collateral-Free Loan | Strong financial statements, business registration details, and equipment information to evaluate the business's creditworthiness |
To secure the right business loan, it's important to be aware of the specific Business Loan Summary and document requirements. Understanding the types of loans, eligibility criteria, and documentation will help streamline the application process and improve your chances of approval. Knowing how to choose the best business loanin India can make this process even smoother.
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Secured Business Loan |
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Secured Business Loan in India |
Types of Secured Business Loan |
How to apply for Secured Business loan |
Eligibility Criteria for Secured Business Loan |
Document Required for Secured Business loan |
Unsecured Business Loan |
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Collateral-Free Loans in India |
Unsecured Business Loan in India |
Types of Unsecured Business Loan |
How to apply for Unsecured Business loan |
Eligibility Criteria for Unsecured Business Loan |
Document Required for Unecured Business loan |
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