A business loan is a loan precisely intended for business purposes. Like other loans, it also involves the creation of a debt. that can be repaid with added interest. There are several different types of business loans, including bank loans, mezzanine financing, asset-based financing, invoice financing, microloans, business cash advances and cash flow loans.
Businesses often require an adequate amount of capital to meet the startup expenses or pay for developments. In such conditions, companies would opt to business loans to gain the financial assistance they need. A business loan is debt that the company is obliged to repay as per the loan’s terms and conditions.
Features of Business Loan
- A business loan interest rate remains fixed throughout the loan tenure. Lender will be offered a floating rate of interest depending on the profile of the lender. In that case the interest rate will differ through the tenure of the loan.
- The significance of a business loan will depend on profile of the borrower. However, credit history is also crucial while the loan application is processed. The higher the credit score, the higher amount at an attractive rate of interest.
- One can also avail the business loan if he/she has lower credit score. A borrower can leverage the application through the status of the revenues, type of business and the assets of the company. In this situation, the assets of the company are more important than the credit score.
- One can avail the startup business loans as it involves very minimal paperwork.
Eligibility Criteria for a Business Loan
- Self-employed people, Proprietors, Private Ltd. Companies and Partnership Firms involved in the business of Manufacturing, Trading or Services.
- The business should have a minimum turnover of Rs. 40 lakhs
- One should have been in current business for a minimum of 3 years, with 5 years total business experience.
- The business should have a Minimal Annual Income (ITR) of Rs. 1.5 lakhs per annum.