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How To Get A Business Loan From A Bank? Start-up Business Loan in India



How To Get A Business Loan From A Bank

How To Get A Business Loan From A Bank: If you are a person who is looking to start a business, then we are pretty sure you are looking for ways to raise funds for your business. There are many ways in which you can get funding to run your business successfully. However, most entrepreneurs find it very easy to get their loan processed when it comes to bank business loans. This is because bank loans give borrowers the flexibility to repay their debts as per the plan chosen with low-interest rates.

Thus, if you are looking to expand your existing business or are willing to start a new business for which you will need funds, you can simply opt for a bank business loan. There are many types of business loans that are offered to entrepreneurs. Based on the bank and plan chosen, the interest rate, tenure, and other factors related to the loan would vary. To understand everything about bank loans and how to get them, read the complete article.

Table of Contents

How To Get A Loan From A Bank To Start A Business?

Getting a loan from a bank is as simple as that. If you meet all the eligibility criteria and have the right documents, then you can get the loan approved in less than 60 minutes. However, before you understand how to get a business loan from a bank, there are many other factors with which you should be familiar. Scroll down to find out what all those factors are.

Types of Bank Business Loan in India

There are various types of bank business loans in India. However, one must opt for a loan that is suitable for their business. Also, it is important for individuals to note that the bank loan parameters (tenure, interest rate, loan amount, loan type) vary from one bank to another bank. To help you understand the various types of business bank loans in India, here is a list of bank loan types. Going through the following list will help you understand the types of bank loans and also help you choose the right business bank loan for your venture.

1. Term Loan: Term loans are the most popular type of loan among business owners. Almost every bank would provide term loans to business owners. You can avail of term loans both in secured and unsecured forms. When you take the term loan, you can choose a flexible repayment schedule and pay your debts and interest as per the schedule you have chosen. One of the main advantages of taking up a term loan is that it comes with a low-interest rate, a fixed interest rate, and a tenure period.

2. Short-Term Loan: Short-term loans are similar to term loans in many ways. when you opt for short-term loans, the repayment schedule will also be short. Short-term loans typically have repayment tenure ranging from three to eighteen months. you will be able to borrow only a little money through a short-term loan.

3. Business Line of Credit: A business line of credit loans works similarly to a credit card. When you are running a business, there might be situations where you are running out of cash or planning to scale the business further. In such circumstances, you can simply approach the business line of credit loan. With this loan, the officials will provide you with money as and when you require it, without any collateral. As discussed previously, the business line of credit loans is similar to that of a credit card because the interest rate would be charged from the date you take up the loan.

4. Equipment Financing: Business owners can take out an equipment financing loan whenever they need to buy something for their business to run smoothly. When you take up the equipment financing loan, the equipment that you have purchased will act as collateral.

5. Invoice Financing: Invoice financing is a type of short-term loan provided by a bank to its clients in exchange for outstanding bills. Invoice finance is frequently used to fulfil a company’s short-term cash needs. When the customer pays their bills, the business owner can pay them back to the lender. However, banks will use this invoice as collateral while processing the loan.

6. Merchant Cash Advance Loan: Merchant Cash Advance is a system through which a business owner pays a lump sum amount in advance to suppliers via daily or future credit or debit card transactions. Small and medium-sized business owners sometimes face short-term money problems. As a result, merchants use Merchant Cash Advance in India to alleviate liquidity constraints in their businesses. Although the interest rate is rather high, it is popular among merchants since repayment is connected to daily sales collected via Point of Sale (POS) equipment located in retail stores, supermarkets, and shopping malls.

7. Business Credit Cards: Business credit cards are not actually loans, but similar to them. When you have business credit cards in your hand, you can purchase all the business-related pieces of equipment and make transactions. The advantage of a business credit card is that you can repay your debts on your fixed schedule and also earn unlimited cashback, rewards, and credit score.

8. Loan Against Gold: Businessmen can also avail of loans by depositing the gold they have. A loan against gold metals such as gold biscuits, gold coins, and ornaments can be deposited and availed against it. The advantage of getting this loan is that you will get the loan instantly and the gold on which you are taking up the loan will be used as collateral.

9. Loan Against Financial Securities: Loans for your business can be obtained in exchange for financial instruments such as mutual fund units, Demat shares, fixed maturity plans, exchange-traded funds, savings bonds, and insurance policies. The funds raised by pledging financial securities or shares might be used to support your company’s needs. All the financial instruments such as insurance policies, mutual fund units, and shares are accepted according to the bank’s policy and individuals can avail loans against it.

List of Banks Offering Business Loans: Interest Rate, Maximum Loan Amount, Tenure

There are various banks that offer bank loans. As discussed above depending upon the bank, loan amount, interest rate, and loan tenure would vary from one bank to another bank. And to help you get an idea, here is a table that tells you about various banks’ loan amounts, interest rates, and loan tenures.

Bank Name Loan Amount Interest Rate Loan Tenure
Axis Bank Rs.50,000 – Rs.50 lakh As per the terms and conditions set by Axis Bank As per the terms and conditions set by Axis Bank
Bank of Baroda Up to Rs.5 lakh As per the terms and conditions set by the Bank of Baroda As per the terms and conditions set by the Bank of Baroda
HDFC Bank Up to Rs.50 lakh 11.90% p.a. – 21.35% p.a 12 months – 48 months
IDFC Banks Rs.5 lakh – Rs.50 lakh 15% p.a. – 24% p.a. 12 months – 36 months
RBL Bank Up to Rs.10 lakh As per the terms and conditions set by RBL Bank 12 months – 60 months
SBI Bank Rs.3 lakh – Rs.75 lakh As per the terms and conditions set by SBI Bank 12 months – 60 months

Eligibility Criteria for a Bank Business Loan

The eligibility criteria for taking a loan from the bank would vary from one bank to another. However, there is a common eligibility criterion to avail of the bank business loan, which is explained below:

  • The individual applying for the bank business loan must be a resident of India.
  • The applicant should be self-employed.
  • The applicant must have 3 years of business experience.
  • The age limit of the applicant must be 21 years old or above.
  • The applicant should have IT returns for the last 2 years.
  • The applicant should submit proof of business turnover.
  • The applicant should show the balance sheet of profitability.

Documents Required for a Business Loan from a Bank

Depending upon the bank where you are applying for a loan, you will have to submit various documents. The list of documents that one will have to keep on hand while applying for a business loan is as follows:

  • Aadhaar Card, Passport, Voter ID card, Pan Card, and other forms of identification are acceptable.
  • Address Proof documents such as passports, telephone bills, gas bills, electricity bills, etc.,
  • Last 6 months’ bank statement
  • Business Income Tax Certificate
  • A Chartered Accountant’s Balance Sheet with Profits and Losses for the Previous Two Years
  • Business proofs such as establishment license, trade license, etc.
  • Sole Proprietor Deed
  • If applicable, a partnership agreement
  • If you are applying for a secured loan, then the house or commercial property documents are required for collateral purposes.

How to Apply for a Business Loan at a Bank?

You can avail of a bank business loan either online or offline. However, the procedure to get a loan through both processes varies from one to another. The detailed steps on how to avail loan through both the online and offline processes have been explained below.

How to Get an Online Business Loan from a Bank?

Follow the steps as outlined below to get a bank business loan through the online process:

  • 1st Step: Visit the official website of the financial lenders.
  • 2nd Step: You will see multiple tabs. Select the Loans tab.
  • 3rd Step: Select the most appropriate loan for your needs.
  • 4th Step: Now fill up the application form with all the necessary details.
  • 5th Step: After filling out the application form, upload all the necessary documents.
  • 6th Step: Now submit the application form by following the steps directed on the bank’s website.
  • 7th Step: Process the application fee, if applicable.
  • 8th Step: Now do the final submission.

Once you submit your application online, the officials will carefully scrutinise your documents and intimate you if you are eligible to avail loan. Also, if you are eligible to avail loan, the officials will do the necessary verification and disburse the loan amount to your bank account.

How to Get an Offline Business Loan from a Bank?

Compared to online, most individuals choose the offline process due to the instant response and assistance of bank employees. The steps to getting a business loan in the offline process are as follows:

  • 1st Step: Visit the physical office of the bank where you are taking up the loan.
  • 2nd Step: Now take the help of any of the bank officials to understand the various types of loans they are offering, interest rates, and tenure.
  • 3rd Step: Decide on the loan that is suitable for you. Fill out the application form.
  • 4th Step: Submit all the necessary documents along with your application form.
  • 5th Step: Process the application fees, if applicable.

After filling out your application form, the officials will carefully scrutinise your documents and process the loan into your bank account.

 Advantages of Bank Business Loans

Individuals would prefer business loans from a bank when compared to any other financial institution. This is because of various parameters such as quick fund disbursal, affordable interest rates, easy application procedure, and many more. Let us discuss the list of benefits of bank business loans here:

  • You must pay interest on your loan, but you are not required to provide the lender with a part of your earnings or ownership in your firm.
  • Interest rates may be fixed for the duration of the loan, allowing you to know the number of repayments over the life of the loan.
  • Most lenders provide lower interest rates on business loans than on other types of loans, owing to the intense battle among lending institutions for customers’ attention.
  • Borrowers may obtain access to cash quickly when applying for a small business loan due to the rapid loan application and approval process.
  • Many banks and non-banking financial companies (NBFCs) provide online loans to clients, allowing them to apply for this plan without leaving their homes.

Best Banks for Business Loans in India

Now that you know everything about how to take a business loan from a bank, Since you have got an overall idea, it is also important for you to know the best banks in India where you can apply for a business loan. And to help you know about it, here is a detailed list of the best banks for business loans.

  • Au Financiers
  • The Bank of Baroda
  • Federal Bank
  • Fullerton, India
  • HDFC Bank
  • Kotak
  • Magma Fincorp
  • State Bank of India

Now that you have been provided with all the necessary information on how to take business loans from the banks of India, We hope this detailed page helps you avail of a business loan from your desired bank. However, when applying for business loans in banks, it is highly recommended that you compare multiple banks and their interest rates and scheme benefits to ensure that your business runs smoothly.

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