When it comes to managing company funds, today’s complicated business circumstances demand quick and strategic judgments. Companies want to take advantage of the opportunity as long as they have access to adequate resources. Entrepreneurs these days seek to apply for a Business Loan with quick availability of cash, minimal paperwork, flexible repayment conditions, and low-interest rates. However, because every company is unique, the terms and conditions of the loans offered by different lenders differ accordingly.
Understanding Types of Business Loans in India
The first step toward finding the right Business Loan is to understand all the types of loans available for businesses in India. Here’s a quick overview:
1. Term Loans
Also known as ‘traditional Business Loans,’ Term Loans are one of the most popular financing options for small businesses in India. They are typically available to finance a company’s expansion plans, working capital requirements, or investments in plants and machinery. The repayment period for Term Loans ranges from 1-to 5 years.
2. Working Capital Loans
As the name suggests, Working Capital Loans are availed to meet a company’s day-to-day operational expenses, such as raw material costs, employee salaries, etc. They are generally short-term loans with a repayment tenure of up to 12 months.
3. Collateral-Free Loans
Also known as ‘unsecured Business Loans,’ Collateral-Free Loans are availed by businesses that do not have any valuable assets to offer as collateral or do not want to put their assets at risk. These loans are generally availed for smaller loan amounts and have shorter repayment tenure than Secured Loans. Most startup companies apply for a Business Loan under this category.
4. Business Line of Credit
It is a flexible loan that allows businesses to withdraw funds as and when required, up to a certain limit. The interest is only levied on the amount of money borrowed. This makes business lines of credit an ideal option for meeting unexpected expenses or seasonal fluctuations in working capital requirements.
5. Loan Against Property (LAP)
A Loan Against Property is known as a Secured Loan. Businesses offer their commercial or residential property as collateral to provide financial assistance. LAPs are generally available for large loan amounts and have longer repayment tenure than other loans. The longer repayment tenure is the reason why many entrepreneurs apply for a Business Loan of this type.
6. Vendor Financing
Banks and other financial institutions can approve a loan against an invoice if you need funds for a short period. The invoice should generally come from a reputable company. Purchases should be used to continue processing orders received by your clients. In some situations, the bank may request that you submit supporting purchase orders or other documents from your client.
7. Loans for Capital Goods/Industrial Equipment
When a company grows, it requires more capacity to handle new sales. Extra space might be provided by additional land, plants, equipment, a vehicle fleet, or other expenditures. Banks provide business loans for one-time purchases that need substantial money. The payment is made via EMI. The assets purchased using this loan are pledged to the bank. Because of this, banks may offer funds at a reasonable interest rate.
8. Business Loan for Professionals
Doctors, CAs, and architects are just a few professionals who may take business loans that are safe and unsecured. Typically, compared to other business finance, such as Term Loans, this comes with reduced interest rates, extended durations, and greater flexibility regarding when payments are due. In addition, based on the level of professional service provided and the company’s age, a higher loan amount may be authorised.
9. Loan Against POS (Point of Sales) Terminal
A loan against your EDC or POS machine is ideal for business owners who run shops, restaurants, hotels, hospitals, and similar enterprises. The loan is granted based on the number of transactions processed on your EDC or POS device every month. This loan’s greatest feature is that it only requires minimal documentation. You don’t have to submit any financial statements or stock statements, making the whole loan procedure more straightforward and quick.
10. Loans for E-commerce Business
Are you selling your items on E-commerce platforms like Flipkart or Amazon? If you need a loan, there is good news for you. Many financial institutions are eager to provide funding based on your previous six months of transactions. You’ll be asked to submit only minimal documentation, and you’ll have the option to repay your debt over time. Several banks may even allow you to pay back every week to keep your finances under control. However, you may pick additional terms, such as monthly, bi-monthly, or quarterly instalments. It will be decided on the amount of money borrowed depending on your e-commerce transactions and credit history.
What Are The Documents Required For Quick Business Loans?
The business loan criteria and documents required vary from lender to lender. However, most lenders require the following documents:
- Proof of identity (PAN card, Aadhar card, passport, etc.)
- Proof of business ownership (registration certificate, partnership deed, Memorandum of Association, etc.)
- Bank statements for the last six months
- Audited financial statements for 2 years
- ITR filings for the last two years
How to Apply Online For Quick Business Loans?
Next to qualifying Business Loan criteria comes the application process. The online process to apply for a Business Loan is simple. Most lenders have an online application process that requires minimal documentation. Here is a step-by-step guide to applying for a quick Business Loan online:
- Research different lenders and compare their loan terms and conditions to find the best deal.
- Check your eligibility criteria and have all the required documents.
- Fill out the online application form with accurate information.
- Upload the documents and submit the form.
- Once the application is approved, the loan money will be disbursed to your account within a few days.
There are a few criteria and conditions you need to meet to apply for a Business Loan online. It is a great way to get the money you need to grow your company. By following these simple steps, you can be on your way to securing the funding you need in no time.