What is a Business Loan?
A business loan is a financial product offered by banks and NBFCs to help businesses manage expenses, expand operations, purchase equipment, increase working capital, or cover other business needs. It can be secured (with collateral) or unsecured (without collateral).
Benefits of a Business Loan
Access to Capital – Provides funds for business expansion, inventory, or new projects.
Maintains Ownership – Unlike investors, lenders do not take equity in your business.
Flexible Usage – Funds can be used for various purposes (working capital, machinery, marketing, etc.).
Builds Credit Profile – Timely repayment improves business creditworthiness.
Quick Disbursement – Many lenders offer fast approval and disbursal for SMEs.
Tax Benefits – Interest paid on business loans can often be claimed as a business expense.
Eligibility Criteria
Eligibility varies by lender, but common factors include:
Business Vintage: Generally at least 1–3 years in operation.
Annual Turnover: Minimum turnover (e.g., ?10–?40 lakhs) as per lender’s norms.
Credit Score: A good CIBIL score (usually 650+) is preferred.
Business Type: Manufacturers, traders, service providers, and other registered businesses.
Applicant’s Age: Typically between 21 and 65 years.
Profitability: Business should be profit-making for the last 1–2 years.
Documents Required
For most lenders, you need:
1. Identity & Address Proof
PAN Card of individual and business
Aadhaar Card / Voter ID / Passport / Driving License
Utility bills or rental agreement (for address proof)
2. Business Proof
Business Registration Certificate / GST Registration
Shop & Establishment Act License
Partnership Deed (for partnerships)
Memorandum & Articles of Association (for companies)
3. Financial Documents
Bank Statements (last 6–12 months)
Income Tax Returns (ITR) for last 1–2 years
Balance Sheet and Profit & Loss Statement (audited)
GST Returns
4. Other
Passport-size photographs
Collateral documents (if applying for a secured loan)