Business Loans – A Complete Guide to Application Process
The dynamic nature of the business demands constant change that must be driven by entrepreneurs. There are several types of businesses such as sole proprietorship, partnership, limited liability companies, etc. Capital is one of the key ingredients to operating any type of business. There are various factors that directly and indirectly impact the running of a business. Thus, there is a constant requirement for funds to run any business smoothly. And to constantly meet the capital demands, you need additional capital from internal as well as external sources. Internal sources include profits made by the company whereas external source includes taking a Business Loan from any bank or NBFC.
Additional capital helps in meeting the demands of the business such as buying new machinery or upgrading offices or any such financial requirements. To calculate the amount of capital needed, you can use a Business Loan calculator. But first, let us understand more about a Business Loan:
So, what is a Business Loan?
A Business Loan is a capital borrowed by a company/enterprise to meet any additional financial requirements. There are different types of Business Loans such as Business Loans for Working capital, Business Loans for MSME, Business Loans for Proprietorship, etc.
Why should you opt for Business Loan?
There are various reasons for opting for a Business Loan such as:
- Higher loan amount: As there are various lenders available in the market, you can choose any of the lenders providing a higher loan amount. Also, depending on the nature of the business and requirements the loan amount might vary.
- Business Loan without Collateral: A Business Loan without collateral is one of the highlighting features of the Business Loan. As an entrepreneur applying for a Business Loan, you can opt for a Business Loan without collateral i.e., you will get a loan without pledging any assets. Hence, there is less risk involved when you go for a business loan apply.
- Online process: You can apply for Business Loan online which makes it convenient for both borrowers as well as lenders. The entire process is streamlined right from the loan application to the disbursal of the loan.
What are the documents required for a Business Loan?
Documentation is an important part of completing the Business Loan process. You need to submit all the necessary documents as evidence of all the provided information.
- KYC documents like the Aadhaar/PAN Card of the company and key person(s).
- Current address proof (Passport/Utility bills/Rent Agreement)
- Bank statements from the last 3 months
- Business registration proof and business address proof
What are the eligibility criteria for Business Loan?
There are three basic eligibility criteria for Business Loan:
- Age: You should be between the age of 22 and 65 years
- Annual turnover: Your business should have a minimum annual turnover of ₹9 Lakh
- Business vintage: At least 2 years of the business vintage is required
How to calculate monthly EMIs using a Business Loan calculator?
A Business Loan calculator is used for calculating your monthly EMIs and business loan interest rate in India. Using the Business Loan calculator, you can calculate your monthly EMIs and plan your loan amount and tenure accordingly. As EMIs are pre-decided between lender and borrower, it is important to understand the factors involved in your monthly EMIs that include your principal amount, rate of interest, and tenure. Here are a few methods that you can use to calculate your monthly EMIs:
- Online Calculator:
You can follow the below steps to calculate your monthly EMI using the Business Loan calculator:
1. As the first step, please visit your lender’s official website. You will find an EMI calculator with different sections such as loan amount, interest rate, and tenure.
2. Enter the desired loan amount, select the interest rate provided by the lender
3. Select the loan duration in the tenure section
4. Lastly, click on the “Calculate” button to find out your EMI Amount instantly
- Manual Calculation:
In case you find the online business EMI calculator on the lender’s website, you can calculate your monthly EMIs manually. You can calculate your EMIs using the simple formula:
E = [P x R x (1+R) ^ N] / [(1+R) ^ (N-1)]
- E = EMI
- P = Principal Loan Amount
- R = Rate of Interest
- N = Loan Tenure in months
In conclusion, today’s markets are customer driven and many businesses struggle to meet their demands due for various reasons. Few businesses don’t survive due to the lack of capital and funding. In such a scenario, a Business Loan without collateral is one of the primary options that businesses should look for. It helps the businesses to get additional funds which can later be used for buying new machinery, boosting sales by marketing and branding, buying raw materials for products, setting up a new office, paying the salary of the staff, etc. While opting for Business Loan, borrowers are skeptical about the repayment and how they will be able to repay the loan. To avoid any default on a Business Loan, borrowers can simply use a Business Loan calculator to plan their Business Loans and pay their monthly EMIs on time.