A business loan is one type of loan that is applied for by people who aim to establish, expand, or buy equipment for their businesses. Entrepreneurs who look for capital to begin their businesses also apply for business loans. In general, there are two types of business loans:

• Secured Business Loans:

A secured business loan is when the individual provides collateral in the form of land, machinery, a house, etc, as security for the loan amount. This has the added benefit of a lower rate of interest.

• Unsecured Business Loans:

An unsecured business loan is when the loan amount is given without any collateral. The interest rates for unsecured loans are generally higher as there is a risk factor involved for the lender.

• You have a strong business plan
• You foresee a decent cash flow in the future through the business
• The capital return of your business is greater than the interest of the loan borrowed

Business loan for special needs:

• While establishing a new business

If an entrepreneur has a business idea that he or she wants to turn into an endeavor with potential income, a business loan can be availed in such a scenario to meet his or her financial needs. However, in order to ensure your loan gets approved, you should make sure that your idea is good enough to generate substantial profits in order to repay the loan interest. You should also make sure that the overhead cost of the business is not high enough to cause a negative impact on the business and its profitability.

• For business expansion

Opting for a business loan is a great way to arrange for the funds required during the expansion of an organization. Business expansion can include starting a new department, the launch of a new product, upgrading an operation or product, venturing a new area or market, etc. Additionally, the chances of loan approval for an existing business are usually high owing to the fact that it holds a proven track record.

• To purchase machinery and equipment

When dealing with a high-demand product, it is essential for the business to maintain a regular supply to the market. In order to do this, the organization might have to increase production by investing in equipment and machinery with the latest technology. Furthermore, a company might also need to buy equipment during an expansion. Business loans are a great way to meet credit needs during such a situation.

• To manage cash flow within the organization

It is difficult for small companies to ensure there is a healthy amount of cash flow within the organization. Therefore, a business might face a shortage of money to fulfill its liquidity requirements for working capital such as utility bills, overhead salary, inventory management, rent, etc. However, this problem can be solved if a business owner opts for a loan to meet the company’s temporary financial crisis.

• Require working capital for business

When the cash flow is low within an organization due to reasons such as market boom and an increase in operating cycles, it is difficult to manage regular expenses such as salaries, supplies, and raw materials. In order to keep the business running and to recover from such a financial crisis, an entrepreneur might decide to avail a business loan and keep the business operational.

• To turn business losses into profits

A business loan can also be availed to receive the funds required in order to make a business that has been incurring losses profitable. Even though many lenders are skeptical when funding a less successful/unsuccessful business, corporate applicants with a practical plan that includes major changes in business operations or the introduction of a new product might convince them to do so.

• To repay previous debts

It is always a smart move to repay multiple small debts using a large loan in order to avoid paying a huge amount of money as interest. A businessman can also choose to do the same by availing a business loan.

• While running a seasonal business

If you are operating a business that is in demand only during a certain time of the year then it might be difficult for you to manage the expenses when the orders start rushing in. In that case, you can secure a short-term business loan to offer undisrupted service to your customers and can repay the loan using the profit earned after the peak season is over.

A few types of business loans are as follows:

• Overdraft facility

In an overdraft facility, the business owner can withdraw a larger sum than the amount present in the account as a loan to meet his or her business needs. The maximum amount that can be withdrawn and the interest rate under this facility is based on a mutual agreement between the lender and borrower.

• Term loans

In the case of a term loan, a borrower can avail a secured or unsecured loan to receive the funds according to the situation and requirement of the business. These loans are helpful in acquiring long-term assets. There are three types of term loans based on tenure namely short-term loans, long-term loans, and intermediate loans that can be repaid on a monthly or quarterly basis. While the rate of interest for such loans can be fixed or floating, it varies according to the loan repayment tenure.

• Demand loans

When an entrepreneur withdraws a demand loan to meet the financial requirements of his or her business, the amount has to be repaid whenever the bank or non-banking financing company (NBFC) recalls it. Demand loans can be both secured and unsecured and are ideal to meet a short-term financial crisis. While the maximum term for this type of a business loan can be 12 months, the merchant can choose to renew it when the term has ended.

• Loan against securities

At the time of a financial crisis, a business can also decide to opt for a loan against its financial securities that are approved by the bank such as mutual funds, fixed maturity plans, insurance policies, savings bonds, Demat shares, exchange-traded funds, etc.

• Letter of credit facility

This type of financing scheme can be availed by a business based on the creditworthiness of the buyer’s bank when the buyer and the seller do not know each other such as during international trade transactions. In this case, the bank pledges on-time payment to the seller after taking account of its origin certificate, insurance certificate, transportation documents, legal documents, and other commercial documents. However, if the buyer fails to make the payment, the bank is liable to pay the entire outstanding amount.

• Cash credit facility

The cash credit facility is an overdraft loan that can be availed by a business to finance its need for working capital by offering its current assets such as receivables, inventory, etc. as collateral. The maximum amount that can be withdrawn using this scheme is dependent on the stock margin fixed by the bank. The tenure of this loan can be renewed at regular intervals of 12 months.

• Bank guarantee

Whether you own a public/private limited company or proprietorship/partnership firm, you can avail of this pre-approved secured loan by offering the residential, commercial, or industrial property as collateral. This financing scheme helps companies secure down loans, buy the required equipment, or cover any additional costs that will help the organization grow. In this kind of a business loan, the financing company promises to pay the stakeholders of the guaranteed business in case it defaults.

• Business loans for women entrepreneurs

In a bid to promote women empowerment, numerous banks and NBFCs offer special loan schemes to existing and potential women entrepreneurs. These exclusive schemes offer a lot of benefits and special discounts in terms of quantum of loan, interest rate, security, etc. Furthermore, female entrepreneurs can also benefit from the consulting, training, and counseling offered by several lenders to help them learn about various aspects of the market and industry. However, these loans are only available to women who hold more than 50% shares of a company.

Some important features of business loan are listed below:

• Accessible and Convenient –
  Accessible is the best feature of banks, it is a very essential factor as well as there will be a need for regular conversations, depositing savings, or any withdrawals. After being a customer for a specific bank for years, the customer gains trust on the bank and simultaneously a good track record will help bank to be lenient with its customers too. This familiarization helps in having personalized services.

• Multiple Loan Options –
  All banks promote various types of programs and schemes to encourage businesspersons setups to make use of these. The actual earnings for all bank are from the rate of interest charges on loans. Few options offered are standard business loans, term loans and others as per the need.

• Non Profit Sharing –
  Angel investors and venture capitalists agree to offer a loan with the agreement of having partly ownership on the business, they will thus get the right to powers of the business and in decision makings also they will share the profits of the business along with the business owner. On the flip side, banks don’t put their hands into business money, everything you earned through your business is all yours. There is no share of profits or losses. Banks sanction a loan with the intention of getting their interest and partial loan-payment installments.

• Lower Rates of Interest –
  Rate of interest in banks is low as compared to those of the lending agencies and few finance instruments such as credit cards, etc.

• Business Loans Offer Tax Benefits–
  Businesses taking bank loans can enjoy tax benefits since the ratio of profits is used to pay the loan amount; it is exempted from tax calculations.

• HDFC Business Loan

HDFC Bank business loan is quick, easy, and provides attractive offers to its customers as well. One can use the online business loan EMI calculator present on the Finance Buddha website to know the approximate EMI which you need to pay against your business loan. HDFC bank gives fast approval and is ideal for a business loan. One can get a business loan up to ₹ 5,000,000 but it will totally depend on the borrower’s eligibility.

HDFC Bank provides a business loan to expand your business, upgrade the equipment, purchase inventory, and pay your staff, and many more. Business loan processing with HDFC is totally a hassle-free and quick process, which is enough to boost your business.

Details:

Interest Rate:
15.65% to 21.20% per annum

Processing Fees & Charges:
Up to 2.50% + GST as applicable

Minimum Loan Amount:
₹ 50,000

Maximum Loan Amount:
₹ 5,000,000

Minimum Tenure:
1 year

Maximum Tenure:
4 years

• IndusInd Bank Business Loan

IndusInd Bank is one solution for all your financial business needs. A business loan from IndusInd Bank has the capacity to boost your business and give it a new shape that can take it to the next level. The bank offers the lowest interest rates to the borrowers. The service provided by the bank is fast, flexible which is followed by speedy disbursal of the loan amount. The customer support system of the bank is very responsive and provides quick answers to all your queries.

Details:
Interest Rate:
10.6% -18%

Processing Fees & Charges:
0.5% + GST as applicable

Minimum Loan Amount:
₹ 100,000

Maximum Loan Amount:
₹ 1,500,000

Minimum Tenure:
1 year

Maximum tenure :
5 years

• IDFC Bank Business Loan

IDFC Bank offers a high loan amount of business loan to its customers which starts from ₹ 100,000 and can go up to ₹ 4,000,000. The interest rate at which loan is offered is also lower than the other banks comparatively. It offers Comfortable tenure of 1 year to 5 years which makes it more comfortable for the applicants to borrow. The process is fast smooth and hassle-free.

Details:

Interest Rate:
11.69% – 15% per annum

Processing Fees & Charges:
1.5% + GST as applicable

Minimum Loan Amount:
₹ 100,000

Maximum Loan Amount:
₹ 4,000,000

Minimum Tenure :
1 year

Maximum Tenure
5 years

• ICICI Bank Business Loan

ICICI Bank comes among the top provides of the business loan. It provides competitive interest rates and offers which makes it more e favorable for the borrowers. Convenience to the borrowers it the topmost priority for this bank and hence they have designed their system likewise.

Details:

Interest Rate:
12.9% – 16.65%

Processing Fee & Charges:
Up to 2% + GST as applicable

Minimum Loan Amount:
₹ 100,000

Maximum Loan Amount:
₹ 100,000,000

Minimum Tenure:
1 year

Maximum Tenure :
5 years

• Axis Bank Business Loan

Axis bank offers business loans at attractive interest rates. The bank has different schemes for different groups of people which helps the existing enterprises to grow. In the case of professionals, it offers collateral-free business loan whereas for SMEs it has different offers which help them to flourish. This loan contains flexible repayment options and Competitive pricing.

Details:

Interest Rate:
The interest rates are based on the assessment of business profile, financial assessment, past business record, loan amount as well as on the tenure period.

Processing Fees & Charges:
Up to 1.25% + ST

Minimum Loan Amount:
₹ 50,000

Maximum Loan Amount:
₹ 15,000,000

Minimum Tenure :
1 year

Maximum Tenure :
3 years

The major 5 pre-requisites for applying for a business loan are mentioned below:

1. Good Personal Credit:

The creditworthiness of a person is evaluated per the CIBIL score, the higher the score is, the more worth and eligible the person.

2.Good Business Credit:

For an existing business, the years of operation, the revenue pattern, creditworthiness is evaluated before considering for processing. An Independent credit score for a company that is associated with the tax ID number and legally incorporated name is considered.

3.Large Asset Base:

Having collateral or security will help in easy processing of the loan, the lesser the risk is, the faster will be the processing of loans by banks.

4. Solid Business Plan:

Even if there is no existing business, having a great business plan with an execution blueprint will be legally considered and scrutinized by the banks for offering a business loan.

5. Industry Experience:

Though it’s rare to get a loan for a business that has no experience, having industry experience will serve the purpose. Having ample knowing and experience in the industry is more than sufficient by banks.

The best 6 steps of finding the right business loan is mentioned below:

Step 1:
Complete all paperwork well in advance.

Step 2:
Draw an estimate of how much money is required now and how much is need for the future.

Step 3:
Seek for experts’ help.

Step 4:
Check for what is the fee, interest rates, and other charges for each bank.

Step 5:
Decide whether you need a long term business partner or just quick capital.

Step 6:

Ask the right questions without hesitation.

One of the easiest and smart ways to apply for a business loan online is Indian loan bazaar; a one-stop solution provider for all business loan requirements is Indian loan bazaar. Indian loan bazaar has a mission to make the digital borrowing experience streamline and hassle-free one. As such we have a very simple, short, and easy to fill online application. Here are simple steps to apply for business loans online.

• Check for the best offers and the best suitable bank for you.
• Fill up the Business loan application form completely available on the website.
• Submit the filled application form along with the documents required.
• Payout Business Loan Processing Fees.
• Sign the loan agreement and Acceptance.
• Your Business loan will be sanctioned and disbursed.