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Business Loan in Chennai – Eligibility, Documents Required, Benefits, Do’s & Dont’s While Applying for One

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Business Loan in Chennai

The city of Chennai or as it is fondly remembered for its old name “Madras” is the commercial and capital hub of South India. Right from automobile manufacturing to the IT services industry, Chennai has been home to one of the fastest-growing companies not just in India but for companies beyond the borders of the nation.

Chennai is rightly known as the gateway of India because it provides and has provided in the past a gateway for millions of entrepreneur and businessman who wants to build a business in the City. The city has a unique aura around it that attracts lakhs of people every year.

Chennai is not just known for its business acumen as a city but it is also the cultural and tourism hub of India. The number of opportunities that one can find in Chennai is plenty in number and that justifies the fact that hundreds of banking and financial houses are situated in the city to help the economy grow. Chennai is one of the five top metropolitan cities of India and contributes significantly to the GDP and economic growth of the country.

Having said that, in this particular article on business loans in Chennai, we are going to provide an idea to all the budding entrepreneurs, existing and established businessman, and businesswoman who wants to fund their business with the right amount of capital and give their ideas wings to fly.

In this particular article on a business loan in Chennai, we are going to provide answers to the following question that an entrepreneur/student, a businessman might have before applying for loans in and around Chennai:

1. How to get business loans in Chennai?
2. Which are the best banks to get business loans in Chennai?
3. What are the different types of business loans that I can get in Chennai?
4. Why should I get a business loan for my company?

Before answering the above questions, we would like to make it clear that this particular article on Business Loans around Chennai gives you an idea only on how to seed your business with the requirement of capital investments but this article itself doesn’t help you in understanding the nuances of business operations how to run a company. Capital investment is just one part of the business but the operational and organizational design of the business is an altogether different ball game which we are not going to discuss in this particular article on business loans in Chennai.

Business Loans in Chennai

As per the recent data from the Union government of India, Chennai has more than 500 startups in various fields such as Artificial Intelligence and machine learning, automobile, pharmaceutical and healthcare, agriculture and food technology, aerospace engineering, retail, robotics, and logistics, etc. It is the new-age startups that are providing hope for the acceleration of the economy of India and if is the financial system of India doesn’t help these creative and 22nd-century startups with the requirement of capital investment, then the dream of India achieving a five trillion dollar economy in the next five years or in fact becoming the next world power in the next few decades will remain stagnant.

There are plenty of ways that a business house or a small startup can get business loans in the city of Chennai. However, before jumping into where and how one can get business loans in Chennai, let us understand what are the different types of business loans that you can opt for:

Different Types of Business Loans

1. Working capital loan
2. Letter of credit
3. Government loans
4. SBA loans or small business administration loans
5. Term loans

There are plenty of other loans that one can get through banks, NBFCs, and other financial institutions, but the above-mentioned five types of loans are the most popular ones and are most likely used by entrepreneurs and business houses in and across India.

Let us briefly understand what each of the above loans means

Working Capital Loan

  • A working capital loan is a type of loan that small business enterprises and startups take from financial institutions for a short period of time, say a maximum of 2 years.
  • The working capital loan is usually obtained by business houses to fulfill their day-to-day activity and operational requirements such as buying of equipment, running of machinery, paying off utility bills, paying of salaries, and various other everyday operations.
  • One of the most important things to remember about working capital loans is that they are provided collateral-free and as a result of which the interest rate on working capital loans are usually on the higher side as compared to other types of loans.

Letter of Credit

  • Letter of credit is a type of loan which guarantees the supplier that the payment shall be made within the specified agreed upon time in the future and this guarantee is by the particular bank that is initiating the transaction between the buyer and supplier.
  • Letter of credit is usually used for international trade where there are plenty of exports and imports happening between two parties across the borders. In certain cases, a letter of credit is also used for domestic transactions.

Government loans

  • Government loans are loans that are provided by the government through public financial institutions to aid and push the economy towards self-sustainability and entrepreneurship.
  • Government scheme-driven loans are usually provided to small MSMEs, startups, and women entrepreneurs who need financial support from the government.
  • Some of the schemes and campaigns run by the central government of India are Mudhra Scheme under PMMY, startup India standup India campaign, Production Linked Incentive (PLI), PMRY, Atma nNrbhar campaign, etc.
  • These loans come in handy as a breather for small business houses that are suffering from a lack of capital investment. Such loans are provided easily as business loans in Chennai

Small Business Administration (SBA) Loans

  • Small business administration loans or simply known as SBA are those loans that are meant for long terms repayment and also the capital can be borrowed from public sector banks and other government-approved lenders for various business operations.
  • However, to avail small business administration loans, the enterprise has to first let the lender know for what the money is being used and the lent money should only be used for the purpose mentioned during the application of the loan.
  • Small Business Administration loans have one of the lowest rates on the market and business houses can borrow huge capital of money (as much as 50 crores).
  • The only catch is the fact that it is very hard to qualify for small business administration loans and the application process is long tedious and extremely regulated.

Term loans

  • A term loan is one of the most common types of loans for seeding your business with enough capital investment.
  • In term loans, one can get a huge lump sum of cash upfront, and then they can start repaying the same with interest for a predetermined period which is agreed between the buyer and lender during the application process of the loan. The interest rate can be static or floating which depends on the type of agreement that the lender and borrower have during the loan application process.
  • Term loans let you borrow high amounts of cash and the process of application is very simple you can obtain the loan in a matter of few weeks
  • However, in term loans, the banks ask for huge collateral other business collateral, or personal collateral.
  • Although the amount of money borrowed is high, the interest rates for term loans are on a higher side as compared to other types of loans such as small business administration loans. There are plenty of institutions in Chennai that can provide such business loans to companies.

The following are the steps for one to get business loans for their enterprise or startup.

Also, Read:

How to get Business Loan in Chennai?

1. Apply for business loans to any of the public sector banks or NBFCs or private lenders as per your risk appetite and vision of your business
2. Some of the documents that you should keep ready are the identity proof of the applicant, the resident proof of the applicant, filled application forms, age proof, Income Tax returns, tax filings, GST documents, etc.
3. Depending on the type of loan applied, you can get the loan sanctioned and cash received within a few weeks to a few years. This timeline also depends on the type of bank that you are getting a loan.
4. Once all the documentation are done and collaterals are received by the banks and after conducting a thorough background check on your business operations, your loan will be processed and you should be receiving the loan amount either in a lump sum or in parts within the timelines described above in the type of loans section.

Documents Required for obtaining Business Loans

One who wants t get a Business Loan needs to submit a few documents at the time of the application process. They are as follows

  • Filled application form with passport-sized photographs.
  • Address proof (Latest Utility Bill/Ration Card/Aadhar Card)
  • Identity Proof (Voter ID/Passport/Driving License/Aadhar Card/PAN Card).
  • Income proof: Last 1-year ITR, Last 2 years P&L statement, and Last 6 months bank statement
  • Any other document required by the lender.
  • Company establishment certificate
  • Company address and vintage proofs

Documents Required for Business Loan in Chennai

Which are the Best Banks to get Business Loans in Chennai?

Some of the top banks, NBFCs, and FinTech firms in Chennai which offers business loans to different types of businesses are as follows:

1. HDFC Bank
2. Axis Bank
3. Bajaj finserv
4. ICICI Bank
5. Tata capital finance
6. Landing card
7. RBL Bank
8. IDFC first bank
9. Hdb financial Limited
10. Yes Bank
11. Flexi loans
12. Bajaj capital

What are the Interest rates for Business Loans in Chennai?

Interest rates are one of the most important factors that entrepreneurs and business houses will take into consideration before applying for business loans. While there is no particular thumb rule for interest rates for business loans, in general, public sector banks will usually have lesser interest rates as compared to NBFCs for private sector banks. However, the Reserve Bank of India, in order to maintain an equilibrium of inflation and deflation of the economy, will set a particular floor rate and ceiling rate for the loan interest rates and the banks should play within this bracket set up by the Reserve Bank of India.

The Reserve Bank of India, by fluctuating the statutory liquidity ratio (SLR), credit reserve ratio (CRR), repo rate and reverse repo rate, help maintain the balance of the economy and push the economy whenever it is required, and help entrepreneurs get a loan at desirable rates.

Why one Should get Business Loans?

Now that you have an idea on how to get business loans in Chennai, where to get business loans in Chennai, and what are the different business loans that one can get in Chennai, now let us understand why you should get a business loan and what you should do with the capital that you have acquired. One has to always remember that loans are always dept instruments and if not used properly for profitability and sustainability of the business house, then it can be fatal for the survival of the business entity.

The following are the points on why one should get business loans and what to do with the capital received:

Expansion of business

Business loans can be used to expand business by acquisition, joint ventures, or by expanding the present business enterprise for more profitability and revenue

Affordable Interest Rates

When the interest rates on loans are low, it is one of the best times to start expanding your business and injecting more capital into your day-to-day operations. The Reserve Bank of India might lower the interest rates by fluctuating the repo and reverse repo rates to give a push to the economy and pull the economy out of recession. The timing of credit injection by a business house during this time is one of the best strategies that one can inculcate in their business corporate strategy.

Certain types of loans do not demand collateral from business houses and depending on the risk appetite of the entrepreneur, a collateral loan should be taken for quick induction of cash into the business system

Business Flexibility

One of the most important reasons why small businesses borrow loans is to have flexibility in their strategy and to sustain market fluctuations or any force majeure events such as the one that we have seen during the covid-19 pandemic or the Russia Ukraine war. Enough cash in the system will provide business houses good flexibility to take free and fair business decisions that will help them in the long run

Loss Making Profitability Strategy

Loss making profitability is a unique term that has been coined recently by gig economy startups. The likes of Amazon, Uber, Swiggy, and Zomato have changed the entire objective of business today. In today’s world, it is not the profitability that is driving investors to invest in start-ups but the market share and market domination are what is made attractive.

The ultimate objective of the new age business house seems to be oligopoly for infant Monopoly status. Business houses inject enough money into the system by providing mind-boggling discounts to customers so that they can acquire market share and eliminate competition while making losses themselves. However, they do know for a fact that these losses are temporary and they can start minting profits once the competition is eliminated and economy of scale can be achieved by market domination.

FAQs on Business Loan in Chennai

1. Can a salaried Person get Business Loan?

Yes, a salaried person can get Business Loan but he/she must be working in MNCs with an average monthly income of more than 25,000.

2. What are the documents required for obtaining Business Loan?

  • Filled application form with passport-sized photographs.
  • Address proof (Latest Utility Bill/Ration Card/Aadhar Card)
  • Identity Proof (Voter ID/Passport/Driving License/Aadhar Card/PAN Card).
  • Income proof: Last 1-year ITR, Last 2 years P&L statement, and Last 6 months bank statement
  • Any other document required by the lender.
  • Company establishment certificate
  • Company address and vintage proofs

3. What are the best banks to take Business Loans in Chennai?

1. HDFC Bank
2. Axis Bank
3. Bajaj finserv
4. ICICI Bank
5. Tata capital finance
6. Landing card
7. RBL Bank
8. IDFC first bank
9. Hdb financial Limited
10. Yes Bank
11. Flexi loans
12. Bajaj capital

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