How To Get A Business Loan In India? Eligibility, Amount, Credit Score, Discount, and More – News18
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Securing a business loan in India requires careful planning, strong financials, and meeting eligibility criteria; here’s everything you need to know.
Business loan amount ranges from Rs 50,000 to Rs 5 crore, depending on business needs and lender policies.
Business loans in India are essential financial tools for entrepreneurs looking to start, expand, or streamline their ventures. With various options available from banks, NBFCs, and government schemes, understanding the process can help secure the right loan for your needs. This guide covers everything you need to know, from eligibility to credit score requirements and discounts.
What Is a Business Loan?
A business loan is a financial product offered by banks, NBFCs, or government programs to provide funding for business-related expenses. These include working capital needs, equipment purchases, expansion, or debt refinancing.
Types of Business Loans in India
- Term Loans: For fixed assets or long-term investments.
- Working Capital Loans: For daily operational expenses.
- Equipment Financing: For purchasing machinery or technology.
- Overdraft Facility: Flexible credit for short-term needs.
- Startup Loans: Special loans for new businesses.
- Government Schemes: Loans under Mudra Yojana, Stand-Up India, and CGTMSE.
Eligibility Criteria for Business Loans
Eligibility requirements may vary by lender, but the general criteria include:
For Proprietors and Businesses
- Age: 21 to 65 years.
- Business Vintage: Minimum 2-3 years of operation.
- Annual Turnover: Varies by lender; typically above Rs 10-15 lakhs.
- Profitability: Stable financial performance for at least 2 years.
For Startups
- A strong business plan with projected revenues.
- Collateral (in some cases).
- Experience in the industry.
Documents Required for a Business Loan
To apply for a business loan in India, you’ll need the following documents:
- Identity Proof: Aadhaar Card, PAN Card, Passport, or Voter ID.
- Address Proof: Utility bills, rent agreement, or business address proof.
Financial Documents:
- Income Tax Returns (ITRs) for the last 2-3 years.
- Bank statements for 6-12 months.
- Profit and loss statements and balance sheets.
Business Proof: GST registration, trade license, or incorporation certificate.
Credit Score and Its Impact on Loan Approval
A credit score (CIBIL score in India) is a numerical representation of your creditworthiness, ranging from 300 to 900.
Ideal Credit Score for Business Loans
- Good Score: 750+
- Fair Score: 650-749 (may require higher interest rates).
- Low Score: Below 650 (may need collateral or guarantors).
Tips to Improve Your Credit Score
- Clear outstanding dues on time.
- Avoid applying for multiple loans simultaneously.
- Maintain a low credit utilisation ratio.
Loan Amount and Interest Rates
Loan amount ranges from Rs 50,000 to Rs 5 crore, depending on business needs and lender policies.
Interest Rates:
- Banks: 8% to 15% annually.
- NBFCs: 12% to 24% annually (based on risk).
- Government Schemes: As low as 7.35% under Mudra Yojana.
Discounts and Government Schemes for Business Loans
The government offers several schemes with discounts and subsidies:
Mudra Yojana: Loans up to Rs 10 lakhs for micro and small businesses.
CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises): Collateral-free loans for MSMEs up to Rs 2 crore.
Stand-Up India Scheme
Loans between Rs 10 lakhs and Rs 1 crore for SC/ST and women entrepreneurs.
Steps to Apply for a Business Loan in India
- Research Loan Options: Compare lenders based on eligibility, interest rates, and terms.
- Check Eligibility: Use online eligibility calculators to estimate approval chances.
- Gather Documentation: Ensure all required documents are ready.
- Apply Online or Offline: Fill out the application form on the lender’s website or visit their branch.
- Await Approval: After verification, lenders may approve and disburse the loan.
Tips to Improve Your Chances of Approval
- Maintain a strong credit score.
- Present a detailed business plan with realistic revenue projections.
- Demonstrate consistent financial performance.
- Reduce existing debt obligations.
FAQs on Business Loans in India
Q1: What is the minimum credit score required for a business loan?
A credit score of 750 or higher improves approval chances significantly.
Q2: Can startups apply for business loans?
Yes, startups can apply if they have a viable business plan and meet lender requirements.
Q3: How long does it take to get a business loan approved?
Approval can take 5-15 working days, depending on the lender.
Q4: Are business loans tax-deductible?
Yes, the interest paid on business loans can be claimed as a business expense under the Income Tax Act.
Conclusion
Securing a business loan in India requires careful planning, strong financials, and meeting eligibility criteria. Whether you’re looking to expand operations or manage working capital, choosing the right loan product can set your business on the path to success. Be sure to leverage government schemes for better interest rates and subsidies.
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