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Our expert team will help you in choosing the right business loan for your needs
What Is Business Loan?
Business loans are lending agreements established between business owners and financial institutions or private lenders. These loans provide funding to entrepreneurs and business owners to be used for investment or working capital purposes, aiding in the expansion and facilitation of various business activities. Business loans are available from a variety of sources, including banks and private organisations. However, it is important to note that business loans may differ from regular loans in terms of formalities, risks, and specific terms and conditions
Types of Business Loans
Many private institutions provide funding through different business loans. Here are 6 common business loans provided for SMEs
In these methods, a business owner is granted the ability to withdraw funds up to a predetermined credit limit from their business account, regardless of the account balance. The excess amount withdrawn is treated as a form of credit, rather than a traditional business loan. The business owner must repay the borrowed funds, along with any applicable interest, by depositing the corresponding amount into the account.
Bank Overdraft/Credit Line
Unlike a loan, equity financing does not require repayment. Instead, investors receive ownership stakes in the company. In some cases, business owners may have the opportunity to repurchase the shares from the investors at a later stage, but it is not directly tied to completing the loan. This option, known as a buyback or equity repurchase, allows the business owners to regain full ownership of the shares by reimbursing the investors at an agreed-upon price.
Equity Funding
As the name suggests they have a shorter repayment period. These loans are provided as working capital and limited capital investment. These are convenient credit options for small and medium enterprises in India.
Short-term Loans
This is a popular method for improving cash flow and capital. It provides funding for the purchase of instruments. These business loans are secured by the equipment as they serve as collateral. The lender can procure the instrument in case of default.
Equipment Finance
These business loans provide short-term credits in exchange for account receivables. These loans are only available to SMEs with commercial customers. The loan tenure typically aligns with the invoice due date. For the loan closure full payment, including the interest and processing charges has to be paid.
Loan on Accounts Receivables
In this arrangement, a factoring company pays the business in advance for accounts receivable. Instead of a full amount a certain percentage of the invoice is paid first. The remaining amount is withheld for unforeseen changes. Both companies have to work on the factoring company for this business loan.
Factoring/Advances
A trade creditor refers to a supplier who has provided goods or services to a business but has yet to be paid. While trade credit is a common practice, it is important to note that it is not typically considered a formal business loan. Rather, it is a form of short-term credit extended by the supplier to the business.
Trade Creditor
Business Loan EMI and How to Calculate It
The EMI is nothing but a dividend of the loan amount that is repaired in fixed monthly payments. These repayments are beneficial for small and medium-size businesses. The Business Loan EMI calculation is done using the following formula:
E = P x r x (1+r)n/(1+r)n-1
- ‘E’ is the EMI
- ‘P’ represents the loan amount
- ‘r’ is the interest rate on a monthly basis
- ‘n’ is the duration of the loan
You can also use the online business EMI calculator. It's quick and easy to use. It provides clear insights into the monthly EMIs.
Features of Business Loan
Vakilsearch provides tailor-made business loans for small and medium businesses in India. We have a user-friendly digital interface that is highly simplified. The entire process of procuring a business loan can be completed in just 72 hours.
Vakilsearch offers business loans up to ₹2 - ₹75 lakhs for eligible SMEs. The processing is quite easy and can be completed within a short time span.
Loan Amount From ₹2 lakhs ₹50 Lakhs
Our team of business experts will cross-verify your documents and complete the processing quickly. There are no bank visits required.
Superfast Processing
Unlike traditional banks, we strive to provide business loans in the quickest turnaround time. Most of the loan documents are processed and provided in just 72 hours.
Quick Turnaround Time
Our unsecured business loans do not require any collateral. It helps you to upscale your business without putting your assets at risk.
No Collateral Required
We provide loan tenures from 12 months to 36 months, offering significant credit relief.
Extended Loan Tenure
We maintain transparency by ensuring zero hidden costs and charges. A one-time processing fee is charged.
Transparent Costs
Vakilsearch provides monthly EMI allowing you to easily repay the business loan. You can also opt for much more flexible repayments.
Flexible Repayments
Benefits of Business Loan
Here are the benefits of obtaining a business loan from Vakilsearch:
Vakilsearch processes business loans in just 72 hours and provides funding on time. This provides you greater leverage in taking time-sensitive business decisions
Faster Processing
Collateral-free business loans are provided quickly under Vakilsearch. You need not worry about liquidating your company ownership or losing your assets
Preserving Your Ownership
A business loan from Vakilsearch assures both capital and time. This will help you as a business owner to enhance your cash flow and achieve profitability. Timely funding will help you to achieve a balance between business funds and company capital.
Streamlining Your Cash Flow
Repaying a business loan on time is a definite way to boost your CIBIL score and business credit score. We make sure to report all the loan accounts to all the credit bureaus.
Improving Your Credit Score
Documents Required for Business Loan
The documents required for a business loan application include:
- Bank statement (12 months)
- Business registration proof
- PAN Card Copy
- Aadhar Card Copy
- Partnership Deed Copy
- Company PAN Card Copy
Apart from this, the following business registration proof is required:
- Business Registration Certificate
- GST filing
- Gumastadhara
- Trade License
- Drug License
- TIN
- VAT registration
Eligibility Criteria for Business Loan
At Vakilsearch we make sure to reduce unnecessary paperwork and documentation. To be eligible for a business loan, you need to meet the following criteria:
Your business should have been in operation for at least 6 months
Established Business
Your business should have a minimum turnover of ₹5 lakhs or more than 6 months preceding your loan application
Minimum Turnover
Your business should not be on the blacklisted or excluded list for SBA finance
Exclusion Criteria
We provide business loans pan India.
Location Eligibility
Vakilsearch is a valid option, we process business loans under 72 hours without any delays.
It is the interest levied on the capital loan amount. It is also called the Annual Percentage Rate (APR). Every lender has a specific interest rate for the business loan.
At Vakilsearch we provide loans up to ₹75 lakhs based on the CIBIL score, monthly revenue and credibility.
The following criteria have to be met to get a business loan without a salary slip:
The business should have filed at least ₹1.5 lakhs as taxes in the particular financial year.
Yes, the ITR documents act as proof of your financial stability and are considered valid proof of income.
You must provide alternative income proof and a good CIBIL score. Get in touch with our loan experts and they will provide you clear insights
The loan terms and conditions are contingent upon the chosen tenure when availing the loan. Our available loan tenures range from 12 to 36 months.
The monthly EMI varies from one individual to another. The total capital loan interest rate and the tenure determine the EMI. You can calculate it using the Vakilsearch business EMI calculator above.
The requirements to get a business loan vary depending on the lender. However, most lenders will require the following:
- Business Plan: The business plan should outline your business goals, strategies, and financial projections.
- Financial Statements: The financial statements should show your business's income, expenses, and assets.
- Credit Score: The lender will check your credit score to assess your risk of defaulting on the loan.
- Collateral: Some lenders may require collateral, such as property or equipment, to secure the loan.
Any business entity can apply for a business loan, including:
- Sole Proprietorships
- Partnerships
- Limited Liability Companies (LLCs)
- Corporations
The time period of a business loan varies depending on the lender and the type of loan. However, most business loans have a term of 1 to 5 years.
The Government of India has initiated a number of loan schemes to help businesses grow and succeed. Some of the most popular loan schemes include:
- Pradhan Mantri Mudra Yojana (PMMY): PMMY is a microfinance scheme that provides loans to micro and small businesses.
- Stand Up India Scheme: Stand Up India scheme provides loans to women entrepreneurs and SC/ST entrepreneurs.
- Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE): CGTMSE provides collateral-free loans to micro and small businesses.