India is presently thought of as a truly developing market on a global scale. The nation’s micro, small, and medium firms contribute immensely to this growth. Over 40% of the country’s GDP depends on the SME sector, which continues to be a critical source of employment for India’s ever-expanding population. However, new businesses always face certain challenges in the initial phase, such as:
- Cash Crunches
- Staff Shortages
- Machine Breakdowns
- Lack Of Inventory
The best way to cope with these shortfalls is by way of a Business Loan in India.
Modern NBFCs like Poonawalla Fincorp and other fintech institutions offer Business Loans at affordable interest rates and flexible tenure with no collateral. Let’s get more insights on getting a Business Loan in India, this can also act as a comprehensive guide to better prepare you before you approach a financial institution for a Business Loan.
How Can New Businesses Secure Business Loans in India?
New business firms have to put more effort into securing a Business Loan in India than established ones since they don’t generate considerable revenue and don’t have much collateral. The same criteria follow for women entrepreneur loans for businesswomen running new businesses.
Approaching NBFCs is the best option for new business enterprises to acquire a Business Loan in India. To make the process easier, you should be familiar with the types of Business Loans, their features, eligibility requirements, and the documents.
Different Types of Business Loans in India for New Businesses
1. Working Capital Loan
Working Capital Loans help new businesses to meet various business needs like:
- Cash Flow Improvement
- Raw Material Purchase
- Inventory Addition
- Paying Salaries
- Hiring Employees
This type of Business Loan in India is typically provided for a short term, This is an unsecured loan that requires no collateral or security. Hence, the interest rate offered is a bit higher when compared to secured or general Business Loans. Furthermore, financial institutions set a limit on the loan amount, which can be utilised only for specific business purposes.
2. Term Loan
A term loan is a financing option that needs to be paid back in EMIs over a set period. This type of Business Loan in India can be both short-term and long-term. The repayment tenure for such loans is 1 to 10 years.
These are collateral-free loans, with the amount going up to ₹1 Crore and above based on business requirements and repayment capacity. The financial partner decides the tenure for a term loan at the time of loan processing, and the interest rate is fixed accordingly.
3. Business Loans for MSME
Micro, small, and medium companies can qualify for MSME Business Loans in India. Such loans are offered specifically to new businesses that are categorised as micro, small, and medium scale and not to established big companies. The borrowers can use this loan to purchase inventory, buy new machinery, pay staff, or expand the business. Multiple online lending institutions in India offer MSME Loans to their customers. The interest levied also varies from NBFC to NBFC.
4. Women Entrepreneurs Loan
India’s small and medium business sector is growing rapidly, and one of the reasons include the rise of women entrepreneurs. In the past, women were discouraged from entering the business world on their own due to restrictions and social beliefs.
However, NBFCs and other fintech institutions changed the scenario entirely by offering exclusive Women Entrepreneurs Loans at affordable interest rates, flexible tenure, and substantial loan amounts.
Now, women are not only entering the business world but are on the verge of matching the revenue and brand growth enjoyed by their male counterparts as well.
Eligibility Criteria for Business Loans in India
- The applicant’s age must be at least 22 years during the loan application and 62 years at loan maturity.
- Applicants must have a business experience of at least 3 years.
- The applicant’s business should have an annual turnover of ₹20 Lakh or above.
- Credit score must be above 750.
Documents Required For Business Loans In India
|Photo Identity proof||Two passport-size photographs|
|ID proof||Passport, Voter’s ID, PAN Card, Aadhar Card, Driving Licence, etc.|
|Address proof||Driver’s license, post-paid telephone bill, voter ID, Aadhaar card, Passport, etc.|
|Age proof||PAN Card or Passport|
|Bank Transaction Statements||Last 6 months|
|Income proof||ITR, salary slips|
|Proof of signature||PAN Card, Passport, or Bank verified signature|
|IFSC Code Proof||Cancelled cheques or the first page of the passbook|
Features of Business Loans in India for New Businesses
- Substantial loan amount
- Quick and smooth disbursal
- Collateral or security-free loans
- Affordable interest rates
- Minimal documentation
- Easy processing
- Flexible repayment tenure
- Online services available
New businesses and small businesses are the backbone of India’s GDP and need to grow further to generate more employment. NBFCs and fintech institutions play a significant role in fast-tracking the growth of new businesses as they offer much-needed capital infusion through Business Loans in India.
The information above will act as a comprehensive guide that will help you avail of Business Loans and build your company to greater heights.