What is Business Loan?
A small business loans is basically a borrowed amount of capital that is used to invest in a new or existing business. Be it small or medium sized enterprises ( SMEs ) or large businesses, it is absolutely essential to understand how these loans work.
From the people involved, formalities, benefits, risks, terms and conditions – all the aspects you need to pay utmost attention to before proceeding to take the loan. Go ahead and learn about them with us below!
Benefits of small business loans
Our small business loans are tailored to help entrepreneurs achieve their business goals. We understand your company needs better than anybody else, which is why our loans are structured to maximize your benefits.
Simple and fast
With the world becoming more global, small business loans are becoming significantly easier to obtain. Many banks and lenders now approve such loans without any collateral. This enables independent businesses to thrive. Additionally, the online loan application process is very easy. It involves a few steps and requires some paperwork.
Nowadays, lenders offer a variety of repayment plans for repaying business loans. Banks and lending agencies are typically aware of the challenges involved in operating a small business. So, they provide terms and conditions that are adaptable. They can permit an increase or decrease in the EMI amount depending on the company’s financial situation. There is also an option of making bullet payments.
Applying for a loan at FlexiLoans is the perfect way to boost your business’s credit score, as we disclose loan reports to all three credit bureaus. Additionally, a business loan from FlexiLoans is particularly advantageous for companies that have recently experienced a credit score drop due to unexpected market conditions.
No collateral required
Small business loans do not endanger your valued investments. We provide unsecured business loans. As a result, you no longer have to consider building your financial assets.
Low-interest small business loans
On a case-by-case basis, FlexiLoans uses advanced methods to analyze and charge the lowest interest rates on business loans. This ensures that the interest rates offered by FlexiLoans are reasonable for any company.
We acknowledge that when you request a business loan, you require funds immediately. Keeping this in mind, we provide instant business loans. We transfer business loan amounts within just 3 days. This way, the company’s growth will not be hampered by a shortage of funds.
Unsecured business loans
We give collateral-free business loans. You do not have to submit any collateral to us to obtain funds for your company. Our no-collateral business loans allow any small business owner to receive funds to fulfill his or her working capital needs.
One of the primary benefits of small business loans is that the loan application processes demand minimum paperwork. As a result, you do not have to prepare numerous documents to obtain a business loan. These loans are provided without any security. There is no need for asset or collateral papers. You can upload documents for business loans online.
We remain committed to assisting small business people in India, and our business loan interest rates are very competitive. It enables business people to obtain financial assistance without worrying about repaying a substantial amount of money.
Business Loan Fees and Interest Rates
|customized interest rates||1.5 to 2% per month|
|credit period||up to 36 months|
|eligibility criteria||> ₹ 90,000 for 3 months turnover|
|loan amount||₹ 50,000 – ₹ 2 crore|
|installments||Flexible Monthly / Bi-weekly|
**Pre-closure is allowed only after full payment of 1st EMI
Eligibility Criteria for Business Loan
mandated eligibility requirements to process business loans expeditiously . We do not require too many documents or unnecessary paperwork which can stall the loan approval process.
- An established business that has been in operation for more than 6 months.
- Minimum turnover of ₹ 90,000 or more in the 3 months preceding your loan application.
- The business should not fall under the Blacklisted/Excluded List for SBA Finance.
- The physical location of your enterprises should not be on the negative location list.
- Trusts, NGOs and charitable institutions are not eligible for small business loans.
Documents Required for Business Loan
|ownership||Partnerships||Pvt. Ltd. / LLP / One Person Company|
|Bank statement (12 months)|
|business registration proof|
|Proprietor(s) PAN Card Copy|
|Proprietor(s) Aadhar Card Copy|
|partnership deed copy|
|company pan card copy|
1) Business Registration Certificate 2) GST Filing 3) Gumastadhara 4) Business License 5) Drug License 6) TIN 7) VAT Registration
3 Simple Steps to Getting Your Business Loan
Simply enter your personal, business and financial information to avail business loan offers.
Upload digital copies of your documents for verification in a single step process.
Get your Business Loan approval and disbursement within 3 working days.
Business Loan Types
It is a misconception of most of the people that only banks and government institutions can sanction business loans. The truth is that there are many types of business investments available in the market that can be considered as business loans. It is important that a small or medium enterprise owner knows about these business loan types in order to get funding for his company through proper channels.
Bank Overdraft / Line of Credit:
This facility is available with both banks and online lenders. It allows a revolving credit facility, in which a businessman can withdraw money from his business account up to an approved limit, even if the actual account balance is less. The extra amount is treated as a business loan, which can be repaid by crediting the account, plus interest.
Business owners can also raise money by selling their stake in the company in lieu of capital investment. While a popular option in more advanced markets such as the United States, equity funding by SMEs is a less preferred option in the Indian investment market, as it carries with it the risk of dilution of ownership. In the case of equity funding, a business owner may retain the option to buy back the shares to return to the preferred ownership level after the investment objectives are met.
Short Term Loans
These loans have a smaller size due to the shorter repayment window. Generally, a short-term loan is given for a period between 3 to 18 months as these loans are meant for working capital finance and limited capital investment.
Equipment finance is a popular means of improving cash flow and working capital. Equipment financing is the use of a loan or lease to purchase or borrow difficult assets. It is a type of secured business loan as the lender has the right over the instrument in case of default.
loan against accounts receivable
Also known as invoice financing, these are very short-term credits, given against accounts receivable. The drawback of these types of business loans is that they can be availed only by SMEs with commercial customers. The loan term typically ends on the invoice due date and requires full payment along with interest and processing fees.
factoring / advance
Under this arrangement, money is paid in advance for accounts receivable to the business by the factor company. However, instead of paying the full amount, a percentage of the amount, usually 70% to 90% of the invoice value, is paid. The rest is kept to cover unforeseen charges, wear and tear, delivery and quality errors. For this type of business loan, both the buying and selling companies have to come together and work with a factoring company.
A supplier who provided goods or services to your business but has not yet been paid for is considered a business creditor. It is a very common arrangement for conducting day to day business activities between buyers, suppliers and service providers with long working relationships. The amount due to a business creditor can also be treated as a very short-term business loan.
Business Loan EMI and How to Calculate it
business loan emi
Different types of business loans can be repaid in different ways. The easiest way to repay a business loan is through Equated Monthly Installments (EMIs). Your loan is divided into equal fixed amount which is paid on monthly basis till full repayment of loan.
An EMI consists of two parts, the principal loan amount and the interest earned. Small and medium businesses find it easier to repay business loans with EMIs, as this method allows them to fund costly assets and expansions without impacting their small operating budget.
How to Calculate Business Loan EMI?
Business loan EMI calculation is done on the basis of a simple formula ie
-1 n e = p xrx (1 + r) n / (1 + r)
‘e’ is the EMI
‘p’ represents the loan amount
‘ r’ denotes the interest rate offered on monthly basis
‘n’ is the tenure of the loan
Business Loan EMI Calculator is a digital version of this formula, which allows you to calculate EMI amount through a web interface. Business Loan EMI Calculator can help you understand the breakdown of interest and principal loan amount, thus, allowing you to decide the layout of your cash processing plan.
Do’s and Don’ts of Business Loan?
A business loan can be a great source of capital for the growth of your venture, but, it can also turn to waste if you do not plan certain aspects carefully. SME loans have a shorter repayment cycle, which means that applying for a very high loan amount will inadvertently increase your EMI amount.
If your business runs into a period of short sales or your invoicing is delayed, it can be difficult to repay the loan and the debt can pile up. Therefore, before applying for a business loan, you should keep a few things in mind.
Have you explored all the other options for managing your business?
When you go for a business loan, it is because you need capital for some important task. However, business loans are not the only way to fund your working capital needs, asset acquisition or new business entity. You can also get the required investment by adopting cost reduction mechanism, increasing production and sales to a limited extent or by using money in your contingency fund.
Hence, consider all your financial options carefully before applying for a business loan. Sometimes it may turn out that you don’t need a business loan at all and end up with a commercial loan for no reason at all.
How do you want to use the loan money?
Deciding how you are going to use the loan amount beforehand can help you grow your business immediately after receiving the loan amount. The money can go directly to funding important tasks. You can also pre-empt the operation of your development plans if you have a previous working relationship with the lender.
Does this benefit your business?
In the end, any type of capital investment should benefit your business. If you have a plan to repay the loan and also have an intended use-case for the loan money, but it is not providing meaningful growth to your operations, you should probably re-think about taking out a business loan. Hence, before applying for your first business loan, plan a growth strategy with your financial planners, operational heads and other business advisors.