Any firm depends on money to survive. Whether launching a new business or growing an established one, money is essential to every facet of a company. A new business loan can be obtained, as well as capital from personal resources like savings and investments.
What is a Business Loan? Meaning & Definition
A Business Loan is an amount of cash lent by a financial institution to a business for economic goals such as extra investment, expansion, and so on. This sort of financing helps businesses meet their immediate expansion and growth necessities.
Business Loan definition can be best explained in this way, ‘funds availed for sustaining and expanding business operations, products, and services.’
Why do you need a Business Loan?
A Business Loan fromCredit success can help your business expand. You can use the money toward business equipment, developing your infrastructure or operations, hiring additional people, or managing day-to-day cash flow. Business Loans can help you keep your company running smoothly while also taking advantage of market opportunities. India’s small and medium businesses continue to rely on the banking sector.
MSME Loans
The ongoing search for sources of working capital is one of the most worrying areas for an entrepreneur’s growth. Finding means to raise finance for a small or medium-sized business (MSMEs) with few assets or collateral can be challenging.
MSME Loans, also known as Micro, Small, and Medium Enterprise Loans, are loans you can get if you run a company or are an entrepreneur. This form of loan gives you working capital that you can use to buy new goods, acquire new equipment, pay your employees’ salaries, or expand your business. MSME loans are available from a variety of lenders in India. Interest rates vary from lender to lender.
| Micro | Small | Medium |
| Investment is limited to Rs.1crore, while revenue is limited to Rs.5crores. | Investment is limited to Rs.10 crores, while revenue is limited to Rs.50 crores. | Investment is limited to Rs.20 crores, while revenue is limited to Rs.100 crores. |
Interest rates on MSME loans begin at 7.65% per annum. Depending on the lender, the loan amount might range from Rs.50,000 to several crores, and the loan repayment period can be as long as 15 years.
Here are some things you should know before asking for a Business Loan from a bank or a non-banking financial institution.
Also Read: Debt Vs Equity Financing: Which is Best for Small Business?
How to get a Business Loan under MSME?
To answer the basic question, ‘How can I get a Business Loan?’ begin with assessing your eligibility for a loan.
Check Your Loan Eligibility
You can apply for a loan if you are one of the following individuals:
- Self-employed
- Proprietors
- Private limited companies that are involved in the business of manufacturing
- Traders
- Partnership firms
- People dealing in services
To make the procedure go smoothly, keep the following general loan eligibility conditions in mind:
At the time of applying for the loan, you must be at least 22 years old.
At the time of maturity, you should not be older than 62 years old.
Your company must have been in operation for a minimum of 3 years, and you must have a minimum annual turnover of Rs.20lakhs.
Steps to Apply for a Business Loan:
Step 1: Log on to Credit success website
Step 2: Navigate to the Business Loans Page
Step 3: Click on the Apply Now button
Step 4: Register for an account with your basic details
Step 5: Fill in the application form with your financial information and requirements.
Step 6: Upload the required documents
Step 7: Click on Submit
Our representatives will get in touch with you to take the process forward.
How Can You Ensure That Your Loan Is Approved?
To be eligible for a Business Loan, you must be able to demonstrate your ability to repay the loan. In addition to this, you need to be fully informed about what is a Business Loan in India. Here are a few suggestions for how to get it right.
1 Maintain a good credit rating.
A credit score is an indicator of creditworthiness. A high credit score indicates that you are financially responsible and unlikely to default on your payments. It also demonstrates your ability to make wise financial decisions.
The company’s loan eligibility is influenced by your or the founders’ credit score, as well as the company’s payment history compiled from numerous institutions. A credit score of 700 or more will boost your creditworthiness and, as a result, your loan worthiness.
2 Show a healthy cash flow in the company.
The lender will assess your company’s cash flow projections to check if it is sufficient for the loan size you are looking for. Previous tax returns and other financial documents will also be analyzed. So, ensure there is sufficient cash flow within the company.
3 Keep your loan application documents ready
Ensure that you compile all required paperwork to simplify the loan application process and make things easier for you and the lender.
The following are some requisite verification documents:
- Proof of Identity & Address
- Proof of business
- Business and personal tax return records
- Business’s financial statements
- Business’s legal documents
Also Read: 5 Easy Ways To Fast Pay Off Your Business Loan Efficiently
Do’s and Don’ts when applying for an MSME loan online
Here are some things to take care of when applying for an MSME loan. Continue reading to increase your chances of securing a loan for your business while lowering your risk of rejection.
- Do’s
- Calculate your loan requirements
- Check your credit score
- Collect all required documents in digital format
- Keep a loan repayment strategy ready
- Don’ts
- Do not apply with multiple lenders, as it will reduce your credit score by a few points.
- Do not delay your repayments for existing debts, as it will impact your credit score and financial goodwill.
- Bottom Line
- Getting the proper type of Business Loan from the appropriate institution at the right time can save you time and money while also allowing you to expand your company significantly in the future. Apply for an unsecured Business Loan online after analyzing all the necessary benefits and drawbacks.
