How to Get Business Loan

If you have dreams to start your business but just do not have the money, you can go for business loans in India. If you can sell your business plan to the banks and even meet the required criteria, then you are eligible to get loans. Apart from funding, banks also give a guarantee or issue letters of credit, on behalf of the customer, to government departments or suppliers for the procurement of goods and services on credit.

If your loan amount is too big and are turned down by a bank you need not feel disappointed. The amount of business loan sanctioned varies from bank to bank. Up to a certain limit you generally, do not have to provide any security. Beyond certain limits, you are required to provide a collateral security or a percentage of business loans as margin. This may be accepted in terms of fixed deposit with the bank. Your business loan is similar to an overdraft. It is available like a limit on current account. In this case interest is charged only on the actual amount utilized, instead of the whole amount of loan.

Types of Business Loans:

Trade Loans
If you plan to start a business or trade you can get trade loans.

You can take the loan to open a new business or expand an existing one. You can procure anything between Rs. 25000 to Rs. 25 lakh. Factors taken into consideration while sanctioning this loan, is the age of the applicant, his financial position, his ability to repay, tenure of the loan etc. The maximum duration for which the loan is given is 5 years and needs to be repaid through EMI or Equated Monthly Installments or.

The rate of interest depends upon the prime lending rate. The rate is also offered on a fixed or varying basis. If required you may need to furnish collateral security for the loan. This may in the form of mortgage of land barring agricultural land and building. Other guarantees accepted include Government Bonds, National Savings Certificates, Assignment of Life Insurance Policies, Bank’s Term Deposits, approved Shares & Bonds in the name of borrower/partner/ proprietor /director.

This kind of business loan is given to Sole Proprietorships, Partnerships and Private Limited Companies.

Fast Business Loans
If required you can also procure fast business loans. If you have a proven record you may not require long credit verifications. To get the process completed all you need is little paperwork. However, further paperwork and credit checks are needed after the money is delivered in order to close the deal on better terms.
For fast loans you need some documents. These are applicable for both Sole Proprietorship / Partnership Firm. These include:

  • Proof of Identity (Copy of Sales Tax / Service Tax / VAT /Excise Registration Receipt OR Registration under Shops and Establishment Act OR PAN ID / IT Return of the Concern OR Electricity /Water / Municipal Tax Bill in the Name of the Concern OR MAPIN Card in the Name of the Concern)
  • Proof of Individual Identity (Voter’s Identity Card/ Copy of Passport / Driving License/ Photo PAN Card /MAPIN Card
  • Proof of Residence Address (Voter’s Identity Card /Copy of Passport/  /Ration Card/ Driving License /Life Insurance Policy/ /Telephone Bill/ Electricity Bill)
  • PAN Number/Form 60 of the Concern
  • Financial Documents (Copy of P & L Account and Balance Sheet for last two years, audited by a CA and Copies of IT returns for the last two years)
  • Bank Statements for last 6 months
  • Partnership Deed, in case of Partnership Firm)
  • Proof of Place of Business
  • Two passport size photographs

To get fast business loans you need to furnish the above documents. The process of getting the loan can be hastened if you have a recognized guarantor with the bank.

Quick Business Loans
For a Private Limited Company you need the following for quick business loans:

  • Proof of Identity same as above
  • Memorandum and Articles of Association (Copy of Certificate of Incorporation)
  • Proof of Individual Identity for the authorized signatories and 2 directors, including the managing director (Copy of Passport/Voter’s Identity Card/Photo PAN Card/Driving License/MAPIN Card)
  • Board Resolution like copy of Annual Return establishing the shareholding pattern
  • List of Directors
  • PAN Card / Form 60 of the Concern
  • Copy of Form 32 filed with ROC
  • Financial Documents (Copy of P & L and Balance Sheet for last two years, audited by a CA, and Copies of IT returns for the last two years)
  • Proof of Place of Business
  • Bank Statements for last 6 months
  • Two passport size photographs

Banks Providing Business Loans in India
All nationalized and private banks provide business loans to traders. To get loans from the state banks is quite tedious and cumbersome. However private banks provide loans with less hassle.