The Indian banking sector has witnessed an enormous growth for the past few years. Considering the economic turmoil in 2020, the overall growth in bank loans remained more than 5.1% as the entire country struggled with a liquidity crisis. There was a significant growth of around 9.2% compared to the previous year in terms of retail loans.
The data presents a clear picture of the stagnant economic condition and why acquiring adequate financing to invest in the business has been difficult. As a smart solution to this problem, entrepreneurs rely on various forms of a business loan based on their business requirements.
Different types of business loans
For new start-up owners, it gets challenging to choose from numerous preferences. They may refer to the following list of business loans to choose the convenient one for their venture –
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Working capital loan
In order to keep business operations smooth, you need to ensure that your business never runs out of working capital. A business’s growth and expansion depend on its working capital and is used to handle daily operations, inventory purchases, investments, etc.
A working capital loan allows you to cover these expenses. Also, business owners can manage their monthly installments conveniently due to this loan’s short-term nature. The basic requirements for these loans include having a good CIBIL score and repayment track record in order to get loan approval during emergencies.
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Business term loan
Term business loans serve as a short-term credit that helps meet specific requirements like business expansion and purchasing necessary assets. In this case, borrowers get the opportunity to choose between different repayment schedules such as monthly, quarterly, annual, etc.; therefore, depending on business expenses, one can opt for this credit facility.
This particular business loan variant comes with specific aspects such as flexible tenors, quick approval and disbursal process, online account access, etc. However, in terms of the eligibility criteria, borrowers are required to meet specific parameters like –
- Applicants’ age should be between 25 years and 65 years.
- They should generate a specified business turnover.
- They must have filed ITR (at least one year).
The overall process is quite flexible and furnished with multiple benefits, as well.
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Business lines of credit
This is another convenient type which allows you to pay the interest for only the amount you have borrowed. It works almost like a credit card where the cardholders can draw and repay funds as per their requirement.
The document requirements for this particular loan include business financial statements, business account information, also ITR documents of both the business and the owner. Apart from that, the company has to be at least six months old to avail this particular loan and utilize its benefits.
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Government-backed loans
The government launched several credit schemes to provide the required assistance to start-ups, MSMEs, SMEs, etc. Such loan schemes are ideally launched to extend required financial aid to both organised and unorganized sector in India to facilitate growth and expansion.
Some of the most popular government business loan schemes in India include –
- Pradhan Mantri Mudra Yojana (PMMY): PMMY scheme mainly aims at extending affordable loan facilities to micro, small and medium enterprises to meet their urgent financial needs. Under MUDRA scheme, financing support is extended to NBFCs and financial institutions. A generous amount will be provided to the small business owners under three categories of MUDRA –
- Shishu: It includes loans up to Rs.50000
- Kishore: It includes loans over Rs.50000 and up to Rs.5 lakh
- Tarun: This category covers credit over Rs.10 lakh
Note that a MUDRA loan is offered as a business credit for traders, vendors, shopkeepers, etc. Also, eligible applicants can easily avail a working capital loan through their MUDRA card or secure equipment finance.
- Stand up India scheme: This business loan scheme was introduced mainly for the budding women entrepreneurs who fall under the SC/ST category. The credit services, offered by all scheduled financial institutions are available to help them establish their enterprises. However, this scheme provides credit only to Green Field Projects.
However, most of these business loan options require applicants to meet stringent eligibility criteria and go through cumbersome documentation.
To escape such hassles, entrepreneurs may avail credit from top financial institutions like Bajaj Finserv who extend pre-approved offers that make financing less time-consuming. These offers are available on different financial products such as business loans, personal loans, etc. To maximize your benefits, make sure to check your pre-approved offer with just name and contact number.
Since business loans involve obtaining a large capital to meet specific requirements, it is advisable to choose lenders providing moderate interest rates so that you can handle other liabilities as well. Make sure to compare offerings of different lending institutions and go through their offered features before applying for the best. You can easily apply for business loans as per your requirements and meet your eligibility criteria.