Starting your own business is a noble enterprise. But we all know that it is not as easy at it seems. One of the toughest challenges people face while starting a new venture is capital. A business loan is one of the most convenient financing options for new business owners. Businesses like proprietorships, partnerships as well as private limited companies can apply for a business loan.
There are two major types of business loans that are available
Secured Business Loan: Here the model is you have to either promise the bank some amount of money or some personal valuable property as a security for the money borrowed. These loans come with lower rates of interest, especially where money is offered as a collateral.
Unsecured Business Loan: Here you do not have to promise any money or collateral against the borrowed amount. However, the interest rates are higher.
You can also opt for three types of loans based on your convenient payback timelines:
- Short Term Loan has a repayment time of one year.
- Intermediate Loan has a repayment time ranging between one and three years.
- Long Term Loan has a repayment time between three to five years.
There are a few eligibility criteria one need to remember while applying for a business loan. These are:
- Minimum Age of Applicant: 21 years
- Maximum Age of Applicant: 65 years
- Minimum Annual Income of Applicant: Rs 1.50 lac
- Minimum Loan Amount: Rs 25,000
- Maximum Loan Amount: Rs 2 crore
You also require a few important documents while applying for a business loan. They are:
- Identity Proof: PAN Card/Voter’s Card/Passport/Driving License
- Age Proof
- Signature Proof: PAN Card + Passport + Signature verified by the Bank
- Residential Address Proof: Ration Card/Utility Bill/LIC Policy Receipt/Rental Agreement
- Income Proof: Bank Statement (last 3 months) from Operating Account + Income Tax Returns (last 2 years) with Income/Certified Financials computed + Proof of Turnover (latest Service Tax returns)
- Proof of Continuity of Current Business: Certificate of continuity issued by the Bank