The present business situations demand quick strategies when it comes to managing business operations and funds. Business owners can grab the market opportunities only if they get appropriate funds at the time of need. When applying for a business loan, most business owners look for an instant business loan.
And surprisingly, quick business loans come with minimal paperwork, flexible repayment tenure, and affordable interest rate. Since every business is different, the type of loan availed, terms and conditions for it vary widely.
Types of Business Loans
Lending institutions offer business loans in various forms, according to the needs and requirements of the businessmen. Some of the most popular business loans are:
- LAP – Loan Against Property
- Unsecured Business Loans
- Working Capital Loans
- Business Loan for Professionals
- Loans Against POS
- E-commerce Loans
Loan against Property
Many lenders offer loans against assets like real estate, factory, home, etc. The Loan-to-Value ratio depends on whether the property is occupied or vacant, commercial or residential, etc. When applying for the loan, the lender asks for the ownership documents to assess the value of the property. Notably, the amount of the loan is proportionate to the value of the property.
The applicant can repay the loan amount in easy EMIs (Equated Monthly Instalments).
Unsecured Business Loan
Unsecured loans don’t require hypothecation of any collateral or security. It is granted based on the financial statements of the business. Lenders would ask for financial documents such as PAN card, bank statements, income tax returns, etc. Unsecured business loans are an ideal option for borrowers who don’t have an asset to hypothecate as collateral.
Working Capital Loan
Many businesses require funds to acquire raw material and labour charges when they receive large orders. However, the customers only pay after they receive the order. To bridge the gap between the processing time and customer’s payment time, the business owners require money in terms of the working capital loan.
Business Loan for Professionals
Working professionals, such as CAs, doctors, architects, etc. require secured and unsecured loans as well. As compared to other types of business loan, business loan for professionals come with lower interest, flexible repayment option, and easy eligibility criteria. Based on the profession and self-employed business, the loan amount is sanctioned.
Loan against POS (Point-of-Sales)
This type of loan is very useful for the owners of restaurants, hotels, hospitals, retails outlets, etc. The loan is sanctioned against average monthly sales. The most convenient feature of the loan is that it requires minimum documentation.
Business owners selling their product on e-commerce platforms can avail e-commerce loans. These loans are sanctioned based on the previous six months’ transactions.
Business Loan Eligibility Criteria
Every lender has its criteria for extending credit facility to the borrowers. Some of the essential eligibility criteria are as listed below:
- ITR for the last 2-3 years
- ITR filed in the previous year should be more than Rs. 1.5 lakhs
- Bank statements for the previous nine months
- Annual turnover of more than Rs. 10 lakhs
- Business and house premise should be separate
- Either business premise or house should be owned
Applying for Business Loans Online
Online loan lenders offer quick business loans as they have fast turnaround time due to online facilities. The applicant has to fill the loan application on the lender’s website, mentioning details such as name, phone number, etc. Upon successful filling the loan application form, the lender’s executive will call to further assist in the loan process.
Amount of Business Loan
The amount of business loan depends on several factors. In broader terms, the size of the business and vintage decides the creditworthiness of the applicant to ascertain the amount of the loan. The main requirements while ascertaining the loan amount include financial reports, income tax, and other returns. It also consists of the past payment history that depicts financial discipline and repayment capacity. The applicant’s creditworthiness (credit score) is also evaluated while sanctioning the loan for business.
Usually, online lenders grant business loans without security. If the applicant wants to increase the loan amount, he can avail a secured loan; the collateral will help in increasing the amount of the loan. Apart from these factors, there are numerous other factors as well, such as ongoing loans. Also, if the applicant has not paid the loan amount in the past, it may become an issue for the lender. Consequently, either he will be denied the loan amount or get a loan at high-interest rates.
Business Loan Interest Rates
Loan interest rates vary widely. It can be as low as just 14% and as high a 50%. The significant factors affecting interest rates for business loan include individual profile, loan nature, financial institution, financial statements, etc.
If you avail a business loan from an online lender, you will get access to quick funds. Besides, knowing all the important factors related to business loans, as mentioned above, will help you prepare for the loan application and avail an instant business loan.