How To Get A Business Loan?

Securing a business loan is crucial for various reasons, such as expanding operations, managing daily expenses, and acquiring essential equipment or inventory. If you're new to the process of applying for a business loan, it's natural to feel uncertain about where to start and which documents are necessary. 

In this article, we will delve into the process of how to get a business loan. Additionally, we'll examine the steps to assist you in seamlessly applying for business loans.

Features and Benefits of Business Loan

Before exploring how do I get a business loan, it is crucial to understand the following benefits and features of a business loan:

• No Collateral Needed
One remarkable aspect of business loans is that they do not necessitate any collateral or security. This characteristic significantly simplifies the loan application process, rendering it more accessible and feasible for aspiring entrepreneurs who may not have substantial assets to pledge.    

• Flexible Repayment Tenures
Business loans distinguish themselves by offering easy and flexible repayment tenures. Entrepreneurs can customize the repayment schedule to align with their business's cash flow, providing a level of adaptability that caters to the unique needs and challenges of each venture.

• Minimal Documentation
Acquiring a business loan involves a streamlined process with minimal documentation requirements. This feature not only expedites the application process but also alleviates the administrative burden on the borrower, allowing them to focus more on their business operations.

• Swift Disbursement of Funds
An advantageous feature of business loans is the prompt disbursement of funds. Once approved, the capital is swiftly deposited into the applicant's bank account. This expeditious transfer ensures that entrepreneurs can address their immediate financial needs without unnecessary delays, facilitating effective business management.  

• Credit-Dependent Interest Rates
The interest rate applied by the lender is contingent upon the applicant's credit history. This personalized approach means that individuals with a strong credit profile have the opportunity to secure more favourable terms. It underscores the importance of maintaining a positive credit history as it directly influences the cost of borrowing for business purposes.

How Can I Get a Business Loan?

When exploring how can I get a business loan, one practical option is to seek financial assistance from a bank or financial institution. This involves applying for a business loan to either launch a new venture or support the expansion of your existing business. The interest rate charged by the bank is determined by the amount of the loan you're seeking and the duration you choose for repayment. 

Check the Credit Score

When applying for a startup loan, it's essential to know that lenders usually review the applicant's credit score. For new businesses, building a credit history may take time, often becoming available after 6-12 months of operations. Since business loans often require personal guarantees, the owner's credit score carries significant weight in the eyes of lenders.

A credit score above 700 increases the chances of loan approval, indicating that the applicant is likely to make timely payments. As a result, potential loan applicants should check their credit scores before applying for startup loans. This simple step ensures a smoother and more informed application process, increasing the likelihood of loan approval.

Eligibility & Documents Required to Get a Business Loan

Understanding the eligibility criteria is pivotal before knowing the steps for how do you get a business loan. The commonly accepted standards include:

In addition to meeting these eligibility criteria, a set of key documents must be submitted along with the loan application:

Ensuring that all these documents are in order and readily available will streamline the loan application process, increasing the likelihood of a successful and efficient approval. 

Steps to Apply Business Loan Online

Here is how to get a business loan online. Follow the steps provided below for a seamless process:

1. Visit the Lender's Website
Access the official website of the lender and locate the online application form.  

2. Fill Out the Online Application Form
Complete the online application form with accurate and relevant details. Ensure that all fields are appropriately filled.

3. Upload Necessary Documents
Attach all required documents as specified by the lender to support your application. This may include identity proof, address proof, financial statements, and any other documents outlined in the application.   

4. Submit the Application
Once all information and documents are uploaded, submit the application through the online portal.  

5. Confirmation Notification
Upon successful submission, expect to receive a confirmation notification through your registered email address or mobile number. This notification acknowledges that your application has been received.   

6. Verification Process
A representative from the lending institution will contact you for verification purposes. If needed, you may have to provide any additional information or clarification.    

7. Loan Offer
Following the verification process, you will receive a loan offer from the lender. This offer will detail important information such as the approved loan amount, interest rate, and other terms and conditions.    

8. Approval and Disbursement
If you choose to accept the loan offer, the last step involves the lender's approval. Upon approval, the final loan amount will be processed directly to your designated bank account.

Business Loans for Startups by the Indian Government

The Government of India has introduced various startup business loan schemes aimed at supporting both MSMEs and startups. The notable ones are:     

• Bank Credit Facilitation Scheme
The Bank Credit Facilitation Scheme, managed by the National Small Industries Corporation (NSIC), focuses on meeting the credit needs of MSME units. NSIC collaborates with various banks to facilitate loans with flexible repayment tenures. In specific cases, the repayment period can be extended up to 11 years, accommodating the diverse financial needs of businesses.

• Pradhan Mantri Mudra Yojana (PMMY)
Launched in 2015 under the guidance of the Micro Units Development and Refinance Agency (MUDRA), PMMY is designed to offer loans for various business sectors, including manufacturing, trading, and services. The scheme classifies loans under three categories - Shishu, Kishor, and Tarun - catering to businesses of varying sizes and needs.  

• Credit Guarantee Scheme (CGS)
This scheme is administered by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). CGS is accessible to both new and existing MSMEs involved in service or manufacturing activities. Additionally, it provides a credit guarantee for loans up to Rs.2 crore, promoting financial inclusivity for a wide range of enterprises.

• Standup India
Initiated in April 2016 and led by SIDBI, Standup India extends loans to enterprises engaged in manufacturing, trading, or services. Offering loans ranging from Rs.10 lakh to Rs.1 crore, this scheme facilitates financial empowerment with a manageable repayment period of seven years and a maximum moratorium period of 18 months.

• Sustainable Finance Scheme
This scheme focuses on providing loans to industries committed to sustainable practices. It aligns with the government's environmental goals by supporting projects related to green energy, renewable energy, technology hardware, and non-renewable energy. 

Conclusion

In conclusion, business loans provide a crucial lifeline for entrepreneurs looking to fuel growth and manage operational expenses. To navigate this financial terrain effectively, it is important to understand the eligibility criteria, assemble required documents meticulously, and be mindful of one's credit score. Government initiatives, such as CGS and the Sustainable Finance Scheme, further expand the avenues for financial support.