A startup business loan can be obtained from a bank or other financial institution in order to raise capital and establish a new business or grow an existing one. The interest rate charged by the bank is decided by the amount borrowed and accordingly, the repayment period is given.

Small and medium firms in India continue to rely on banking and NBFC(Non-Banking Financial Company) for financial aid in terms of loans.

Your small business can grow with the support of a business loan, which allows you to invest in infrastructure, operations, and plant and machinery. Furthermore, business loans might be a great way to keep your firm running smoothly.

What is a business loan?

A business loan is essentially a sum of money obtained to invest in a new or existing firm. It is a type of finance that you might use to satisfy the urgent needs of your expanding firm.

An MSME loan, on the other hand, is for small firms and startups to expand business prospects and develop the MSME sector. It is critical for micro, small, and medium-sized businesses (MSMEs) and large firms to understand how these loans function.

MSME loan schemes are primarily utilized by business owners and enterprises to meet their working capital needs, to pay salaries, renovation of the company, for advertisement, and promotional activities.

Most banks and non-bank financial institutions (NBFCs) make SME and MSME loans without requiring collateral or security from borrowers. 

Before you start to take a loan, you must pay close attention to all aspects, including the individuals involved, the procedures, benefits, risks, and terms and conditions. Continue reading to learn more about how to get a business loan:

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Your eligibility for a business loan

These points will determine if you are eligible for a business loan:

Age of your business

The length of time your company has been in operation will be taken into account by lenders. Most online small-enterprise loans require at least two years of business experience, and most bank loans require at least two years of business experience.

Credit score

Any major credit bureaus will provide your credit report for free. This is a key criterion for determining your eligibility as it will tell the bank whether or not you will be able to repay your loan on time.

Income tax filing

The borrower needs to file an ITR of more than 1.5 lac in the previous year of applying for a loan.

Determine the sort of loan you require

Lenders will inquire as to why you need a small business loan in the first place. Lenders normally expect cash flow to sustain loan repayment, therefore businesses in their first year are unlikely to obtain financing.

You’ll have to rely on alternative sources of beginning funding, such as business credit cards and personal loans.

A business line of credit may be beneficial. This type of flexible financing allows you to access funds as needed to cover obligations such as payroll or unexpected costs such as repairs, providing a handy safety net when needed.

Many lenders also have products tailored to the demands of a developing business.

Explore small-business financing options

Many lenders have products tailored to the demands of a developing business. Small-business loans can be obtained from three different sources: online lenders, banks, and nonprofit microlenders.

Each usually has several goods, but one may be superior to the others under particular situations.

If you are short on time in business, don’t have collateral, and need a loan quickly, borrowing from an internet lender is a good option.

  • Whereas typically, a bank will require that your firm be two years established, have a strong credit score, and that you do not require cash immediately. Due to considerations such as reduced sales volume and cash reserves, obtaining a small-business loan from a bank might be difficult. When you add in low personal credit or a lack of collateral, many small-business owners are left holding the bag.
  • When you don’t have a credit history, are a new firm, or can’t acquire a typical business loan, microlending is the best alternative. Furthermore, the loans are “micro” by definition. These loans, on the other hand, maybe useful for smaller businesses or startups who are unable to obtain typical bank loans due to a lack of collateral, a lack of operating history, or a lack of personal credit.
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Collect all of your documentation

Make sure you have all of the necessary business loan documents before applying. The process of obtaining a small-business loan will be simplified if these files can be located and made easily accessible now.

  • PAN card
  • Tax returns for both businesses and individuals
  • Personal and business Bank statements
  • Financial statements for a business
  • Proof of address

Make an application for a business loan

After all the research, it’s time to make a business loan application to the type and lender that’s best for you. Begin by comparing two or three comparable loan possibilities based on loan conditions and annual percentage rate.

It is the easiest way to comprehend the overall cost of a company loan for the year because it includes all loan expenses in addition to the interest rate.

Choose the loan with the lowest interest rate among those you qualify for and apply with the documentation you’ve acquired. 

It’s worth noting that credit bureaus make no distinction between commercial and personal queries. When applying for a small business loan, your credit score may be damaged if you utilize your personal credit history, which is why it’s crucial to go with your best option.

Get a secured business loan from ZipLoan if you need funding to build infrastructure, replace machinery, manage inventory, increase working capital, or expand operations.

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Easy funding alternatives, flexible payback options, an online business loan application form, and funds available within three days are just a few of the advantages of working with us.

We require minimum documentation and process applications within just three days’ time and give out loans with a reasonable interest rate and payback time.

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Frequently Asked Questions

What is a Business Loan?

A business loan is a kind of loan scheme that is designed to help entrepreneurs to manage their cash flow, buy new machinery, hire skilled employees, and more.

How do I qualify for a business loan?

1) Build personal and business credit scores.
2) Know the lender’s minimum qualifications and requirements
3) Gather financial and legal documents
4) Develop a strong business plan

Bank vs NBFC which is best for applying for a business loan?

Both are good but NBFCs require fewer documents and process faster than banks.

What is the minimum bank balance required for a business loan?

Availing a business loan from Ziploan is easy and requires a minimum turnover of last year of 10 lakhs only.

What is the age limit for business loans?

The minimum age of the applicant is 21 years in the case of self-employed individuals, the minimum age for the salaried is 26 years. The maximum age limit is 60 years in the case of a salaried applicant. The maximum age limit is 65 years for self-employed applicants.

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