In the last few years, the number of small businesses has multiplied, thanks to the rising wave of entrepreneurship and extensive support from the government. While these businesses generally have requisite funds to carry out their daily operations, there are times when there is a massive financial crunch. This financial hurdle leads to several companies closing down or struggling to realise their potential.
Small business loans come to the rescue at this stage! Several small businesses go for an unsecured short-term business loan since funds can be availed without any security in terms of a valuable asset, unlike a secured business loan. Besides, there’s minimal paperwork to be done while applying for this loan.
The amount of these loans is decided on the basis of your CIBIL score, but most lenders also have their eligibility process. In most cases, this is what the eligibility criteria look like:
- A minimum of two years of business vintage
- A turnover of at least INR 10 lakhs in the last one year
- ITR filed in the previous to be at least Rs. 1.5 lakhs
Among the various financial institutions operating in India, NBFCs (Non-Banking Financial Companies) have fast emerged as the preferred borrowing option for small businesses. The shift in preference has been majorly due to the numerous benefits and advantages one can avail from an NBFC business loan. You can also use online tools, such as an online loan calculator to get an accurate estimate of the expected EMIs. Besides, a loan eligibility calculator can also be used to calculate eligibility for a loan for a business.
For instance, if you want a loan of up to Rs. 5 lakhs from an NBFC, your company must have an annual turnover of Rs. 10 lakhs in the previous financial year. These alternative lenders also offer flexible repayment tenures, ranging from 12 to 24 months. Besides, you can also foreclose the loan account after payment of 6 EMIs, without paying any foreclosure charges.
These online lenders have their process to sanction a loan. They follow an independent credit evaluation process, wherein they evaluate the creditworthiness of the borrower by taking several business factors into account, apart from the CIBIL score and history. That’s why it is easier to get an unsecured business loan, as in the case of traditional lenders.
The process is simple, convenient, quick, and hassle-free. These NBFCs follow a paper-less process where they only require to provide soft copies (PDFs) of the basic, KYC, and business documents. If the application meets the eligibility criteria of the lender, the application would be approved, and funds would be disbursed within a few working days.
The online lender will keep you informed regarding the stage of the loan application through SMSs, e-mails, and calls. You can conveniently apply for a business loan online through the lender’s mobile app or website. It saves you a lot of time since you don’t have to keep making visits to the bank!
How to get a Small Business Loan?
You can get a business loan for your company in as little as five steps! Here’s how:
- Identify the need: The first step is to assess your needs and then decide on an amount. This is important because your loan amount will have a direct impact on your finances. In a nutshell, you would be paying additional interest in case the amount is more than you need. You must also perform a thorough research online as well as offline to identify the loan lenders operating in the market. Check if those who offer unsecured business loans can meet your business requirements. Next, select the loan product that can fulfil all your business needs.
- Check the eligibility: You can check the eligibility on the website of the online lender. Besides, you must apply for an amount that is lower than your eligibility to increase the chances of getting the loan approved.
Here are the Eligibility Criteria:
- ITR of more than Rs. 1.5 lakhs in the previous year
- The business owner should own either a house or business place
- Business turnover during the last year should be more than Rs. 10 lakhs
- House and business office should be separate
- Fill out the Application Form: Fill out the online application form to apply for a business loan. It will also require you to upload the soft copies or PDFs of the documents required by the lender. Make sure your application form is filled correctly, and all the documents are correctly verified and uploaded.
- Processing the Application: Once you send the application form and all your documents, your lender would then verify your details as per their terms and conditions. This includes checking the CIBIL score and history and conducting a credit evaluation check. This is the stage when your application could be approved/rejected.
- Disbursal of the Loan: Once the lender approves your application, you will receive funds within a few days. A representative from the lender’s side will come to you with a loan disbursement kit to sign the loan agreement.