Loans for Business

When applying for a business loan, you need to provide the following documents and information:

Business Plan: A thorough business plan gives lenders insight into your business, illustrating your strategy, market analysis, and financial projections.

Personal and Business Credit Reports: Lenders usually check both these reports to assess your creditworthiness.

Financial Statements: This includes balance sheets, income statements, and cash flow statements for the past 2-3 years. If your business is new, you may need to provide projected financial statements.

Bank Statements: Lenders often require both personal and business bank statements to understand your financial behaviour and the business' cash flow.

Tax Returns: You'll need to provide both personal and business tax returns for the past 2-3 years.

Legal Documents: These may include your business license and registration, articles of incorporation, contracts with third parties, franchise agreements, and any commercial leases.

Collateral Information: If you're applying for a secured loan, you'll need to provide details about the collateral that you're offering.

Ownership and Affiliations: Lenders will want to know the ownership structure of your business and any affiliations with other companies.

Business Resume: Some lenders may want to know about you (and your management team's) business experience.

Loan Application Form: Many lenders have their loan application form that you will need to fill out.

Remember, requirements can vary by lender and the type of loan you're applying for. It's always a good idea to check with your lender to confirm what you'll need to provide.

The loan approval may differ depending on the nature of your business loan. It usually takes a few days to a couple of weeks for the business loan to get approved. Certain lenders provide faster processing of small amount loans, whereas, for large loans, it may take a bit longer for documentation and evaluation.

Usually, banks/other financial institutions charge a fee of 2.5-3% on the principal amount for processing a loan application. This fee is non-refundable in nature and it is a one-time cost.

Several banks offer business loans to start a new business. Therefore, it is crucial to have a solid business plan in place along with a decent credit history.

Starting a new business is always a risqué move especially when you do not have a strong financial background. So if you’re planning to go for a business loan, you need to consider several risk factors. You could land in high debts if you default on your loan payments. You could lose collateral, your personal assets could be at risk if you don’t repay your loans on time.

Most business loans do not have a prepayment penalty which means you can repay the loan amount anytime without having to pay the penalty. However, it’s advisable to check with your lender before taking a business loan to be sure of the no penalty on prepayment clause.

Your personal credit history determines your spending habits and your financial positioning. Especially in cases of small businesses, lenders or banks may want to study your personal credit profile as it is a deciding factor to sanction a business loan for you.

If you default on a business loan, your credit score will be impacted negatively and you may not be able to secure any loan in future. Also, if you are repeatedly defaulting on your loan repayments, then the lender may also start legal proceedings to recover the loan amount.

Yes, various government programs such as the Pradhan Mantri Mudra Yojana scheme offers loan amount of up to ₹10 lakhs to micro, small, and medium sized companies to start their business dream.