Small businesses often look for new growth opportunities; however, the risks and difficulties are vast in uncertain situations. Therefore, during these hard times, funding is critical at reasonable interest rates. It does not matter what kind of business you run, as the funding depends upon market trends and funding authorities. Business loans are available for short and long periods, and plenty of options are available.
With the pandemic wreaking havoc for the past two years, businesses need capital now more than ever. As the pandemic subsides, business loans are required to gain momentum in the market. Business loan interest rates depend on factors like credit rating, market trends, and the amount of loan your business needs. Therefore, it is necessary to know the type of loans before applying for a business loan.
Types of loans
Angel investing is done by investors who wish to invest in a business that they feel has the potential to become a big venture in the future. However, you need to have a strong business plan before approaching an angel investor.
Working capital loan
This loan is availed by businesses that are in dire need of liquid cash in the form of a business loan. A working capital loan is highly resourceful, and the business loan interest rates can range anywhere between 12-16 per cent.
Term loans are given for a specific purpose for a fixed tenure with a repayment schedule. You get the interest rate charged on the entire loan amount, and the business loan interest rates are lower for more extended periods. Secured term loans are sanctioned for 15 to 20 years, while unsecured loans are granted only for 5 years.
Government schemes and bank loans
The government has several schemes for prioritising MSME loans, and it comes under priority sector lending. The interest rates start as low as 7.5 per cent per annum for a business loan amount of Rs 50,000. These loans can be availed from commercial banks, NBFCs, RRBs, and cooperative banks. A bank loan is the most preferred option for businesses with a good record and collateral.
There are many factors that affect monthly EMIs on your business loan. You should always do a proper research to understand the interest rates, loan tenure, and loan amounts before coming to a conclusion.
Business loan eligibility
For a self-employed individual, the business loan eligibility is not very complicated. You need to be between 25-65 years of age and have a business that has seen profitability for three consequent financial years. In addition to that, your turnover needs to show an upward trend, and you need to get your balance sheet audited by a registered Chartered Accountant.
There are various documents required for business loan eligibility. Below are the documents you need:
- Proof of income (balance sheet and profit-loss statement)
- KYC documents (PAN card, Memorandum and Article of Association)
- Photo identity proof
- Business proof (Copy of ownership papers, Copy of Partnership Deed, Sales Tax certificate)
- Bank statements for the past six months.
To improve your business loan eligibility, you need to build a good CIBIL score and pay off any existing liabilities, loans, and credit card bills. A small business also needs to ensure that it is not availing various loans simultaneously, as it can affect creditworthiness.
Business loan EMI calculator
The Business loan EMI calculator is a simple tool to compare various loans without any additional work. You can select the best rates for your business loan after comparison. There are multiple advantages of using this tool, and you can get your estimated EMI instantly.
- Calculations can be done instantly without any hassle.
- Different loan amounts can be compared at the click of a button.
- Lending amounts along with lenders and interest rates can also be compared easily.
Businesses have various options these days for getting a business loan. The government has been actively promoting MSME loans and training for small businesses. Business loans come with faster processing and minimum paperwork in banks now, and term loans can be used to purchase various equipment and machinery. So you can study all the possibilities before securing suitable funding for your business.