Every entrepreneur or a business owner needs fund to expand and develop their business idea. In such scenarios, opting for a business loan can be the best decision ever. Business loans serve as the most important component of the financial structure of any company, and slowly it becomes the most important component of a company’s balance sheet. Hence, business loans help you in taking the next step in your business trajectory.
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Purpose of Business Loan
First of all, you have to understand the purpose-that why you need the loan. Business needs can be different, which clearly signals that the loan requirement would be different. Once you clear with the purpose, it would be easy for you to quantify the amount of loan as there are varieties of business loan products available in the financial market. If the requirement is to buy machinery, there are many lenders who can provide you the equipment and machinery loan or equipment finance. Therefore knowing the need and purpose for the business loan is vital.
Benefits of Business Loan
- Comparative to other premium loan product in the market, the business loan comes with lower interest rates.
- The loan process is convenient and personalized.
- You can use the fund for any business-oriented purpose depending on your requirements.
- Easy repayment options, in the form of EMI’s
- It can help your business to gain an edge over your competitors.
Business Loan Eligibility
If you need to apply for a business loan, we would like to tell you first that the process is not the same as applying for an individual loan. The requirements and the paperwork involved in the whole process are bit different and stringent. Once you fit in the eligibility criteria like your age, income and your overall profile, lenders offer the loan amount. Hence, it is important to understand the business loan eligibility first.
- Your age must be in the range of 21 to 65.
- You should be in the business for at least 2 to 3 years.
- While filling the business loan application form, your business partner can be a co-applicant in it.
- Established Business that has been in the operations for more than a year
- Your business should not come under the shadow of blacklisted.
- Business Location matters! The coordinates of your business should not be in the negative location list.
- Personal Credit Score Matters a lot-Whether the business is a sole proprietorship or partnership, lenders consider applicant personal credit score. In a small business, the founder is often the whole and soul, and also the face of business.
Documents Required for Business Loans:
Well, in order to be a potential loan applicant, you would be required to submit some certain set of documents to the lender. However, there may be some little variation with the subject to specific requirements as it depends on the lender to lender. Below listed are the set of common documents that are required to process the loan application faster:
- Identity Proof such as PAN Card, Aadhar Card, Voter Id, etc.
- Passport size photograph
- Residential Proof
- Cash Flow Statements
- Bank Statements for the last 12 months
- Income Sheet
- Tax Returns and proof of the statement’s owner’s equity
- Collateral documentation
- Legal documents and licenses
For Self Employed
- IT returns for the last 3 years with profit and loss account, and balance sheet duly audited by a chartered accountant.
- Previous or existing Loan Sanction letters with repayment track.
- Business Profile of your company mentioned on the letterhead
For Private Limited Company
- Along with duly filled and signed a loan application form, with photographs of directors (if any)
- Proof of Age-PAN Card, Passport, Aadhar Card, etc
- Residential Proof such as Utility Bills, bank statement, or rental agreement, etc.
- PAN Card of your company
- Educational Qualification- a professional certificate in case of a doctor, CA, etc.
- Proof of business- such as VAT registration or service tax certificate, or shop establishment certificate
- List of complete directors, and shareholders in the company
- Last 3 years of IT returns with P&L account, and balance sheet duly audited by CA.