A Step-by-Step Guide to Securing Your First Business Loan

How to Get a Business Loan in India?

In India, there are several ways to secure a business loan, with options available from banks, NBFCs (Non-Banking Financial Companies), fintech players and government-backed schemes. Understanding the different types of business loans in India is essential to choosing the one that best suits your business goals.

If you are applying for your first new business loan, here's a simple process to follow:

• Understand your financing needs and decide how much money you need
• Select a relevant lender such as a bank, NBFC, or government loan scheme.
• Choose the best loan type after comparing interest rates, repayment terms, and features.
• Check the documentation requirements and eligibility criteria before applying.
• Apply for the business loan online or at the lender's branch for faster approval.

Following these steps will help you apply for your first business loan confidently and avoid common mistakes that could delay approval.

Now, let's explore each step in detail to understand the nitty-gritty of the process. so you can choose the right business loan in India with confidence. and avoid costly mistakes.

Step 1: Assess Your Business Loan Requirements

Taking a business loan is a crucial step for business growth. If it goes wrong, you might face challenges during the repayment cycle, due to unforeseen complications. Therefore, it is important to understand your business loan requirements.

Take into account the costs related to inventory, marketing, invoicing, purchasing equipment, and daily operation costs. Understand the types of business loans to make a better decision. Broadly, banks and NBFCs in India offer secured business loans & unsecured business loans.

Then there are a few NBFCs that offer business loans for specific purposes.

Beyond that, the duration of the loans also matter. Short-term loans help in paying off salaries, closing creditors' debt and other commitments. However, a long-term loan will help you build assets.

Choose a business loan based on your requirement to avoid missing EMI payments. To sum up, you should ask the following three questions:

• How much money do you need?
• Why do you need this loan?
• How will you repay the loan?

Once you have answers to these questions, you are ready to secure your first business loan.

Step 2: Find the Right Lending Partner

Now that you have answers to all critical questions, you must look for the right financial institutions. Check various lending sources like banks, NBFCs, and online players.

Business loans are provided by various financial institutions. Banks, NBFCs, Fintech players, Government-backed schemes, all are providing a business loan offering. Let's understand these options in short.

Banks

These are traditional financial institutes which are chosen and trusted in the financial markets by business owners and retail bankers, alike. While the interest rates can be lower, banks have a long approval process, and documentation is stringent.

Non-Banking Financial Companies (NBFC)

NBFCs have become an alternate banking channel where you can't keep deposits, but you get the experience of a bank. They offer a more flexible documentation and approval process. NBFCs, like Ambit Finvest, also have more flexibility with respect to eligibility criteria.

Read Also: How to do UDYAM registration? A simple guide for MSMEs in India

Fintech Leaders

The banks and NBFCs are tech-friendly, while fintech leaders leverage technology to offer you business loan solutions. If you are choosing fintech, ensure that you are well-aware about the policies and the online risks involved.

Government-Backed Scheme

Then, there are Government-backed schemes like MUDRA loans. These loans are great for starting out something big. It offers a collateral-free loan up to ₹10 Lakhs.

Only go for business loans from regulated entities like the RBI. Banks and RBI-registered NBFCs are a good start.

Check their policies and see if they align with your business loan requirements. Choose the one that best matches your expectations.

Step 3: Check EMI on Business Loan EMI Calculators

Once you have chosen the lender, the eligibility criteria is met, you should check your EMI liability with the help of a business loan EMI calculator. Almost all lenders have this tool on their website to help their prospects predict EMI liability.

Another way to use an EMI calculator is if you are looking for a loan, but want to get a sense of the required financial bandwidth to pay timely EMIs. In that case, this will become your step 1.

It will help you take care of your overall financial health and see if you can repay the loan without any hardships. Taking an informed decision is always better when it comes to business loan EMI repayments, as per the interest rates.

Step 4: Keep Your Business Loan Documents Ready

You are now aware of your EMIs, required loan amount, and most importantly, the lender you have chosen. Now, comes the most critical important step of all, the documentation.

Speak with your customer relationship manager and take down a list of documents required to be submitted. They will guide you best as to what documents should be ready and which one plays the major role in the business loan approval process.

In most cases, you will need the following documents to get your first business loan:

If you are a new business, you would need a solid business plan, consisting of all the details about your business, plans, revenue model and other important details.

Read Also: What are the top 5 reasons to get a business loan in India?

Step 5: Apply for A Business Loan

Now that you are equipped with all the right documents, you should submit it and wait for the business loan to get approved. Gone are the days when you had to travel to the branch and submit your documents. You can do this on the go now. Lenders provide online portals or share upload document links where you can directly upload the documents securely, without any worries.

Securing your first business loan can be daunting, but a staggered approach can help you reduce your stress to a certain extent. Make a business growth checklist, and tick off each step until you have submitted all the business loan documents for approval.

Here is a step-by-step process to apply for a secured business loan:

Frequently Asked Questions