What is a business loan?
A business loan is basically a borrowed amount of capital that is used for an investment in a new or existing business set up. Whether small or medium-sized enterprises (SMEs) or large businesses, it is absolutely important to understand how these loans work.
From the people involved, the formalities, benefits, to the risks, terms and conditions – all the aspects require your utmost attention before you proceed to take a loan. Proceed and learn about them below with us!
Features of Lendingkart Business Loan
Lendingkart offers customized business loans for small and medium businesses in India. Our loans are free from the bureaucratic red tape that often accompanies bank loans and have a very straightforward application, approval and disbursal process. We have designed a fast and efficient digital interface that minimizes human interaction and thus helps in speeding up the whole ‘taking a business loan’ process.
We offer business loans of ₹ 50,000 up to ₹ 2 Crore to eligible SMEs. Our wider loan window increases the chances of business loan approval and provides you the funds needed for growth and expansion of your venture.
We have taken loan processing times to the next level through our Online Only loan application process. It allows us to by-pass a lot of manual work and provide same-day loan approvals.
Lendingkart’s offers business loans faster than the 59 Minute Business Loan scheme. With our online business loan processing, you can get a business loan within 3 days as opposed to 8-10 days taken by banks.
A business loan from Lendingkart does not put your valuable assets on risk. We offer unsecured business loans that do not require any collateral or security. So, you don’t have to worry about developing your capital assets anymore.
Lendingkart uses proprietary big data and machine learning tools to determine the lowest interest rates on business loans, on a case to case basis. This means, the interest rates you get from Lendingkart are the best ones available for your business.
Our loan tenure of minimum 1 month and maximum 36 months, vastly extends the credit relief for your business. If you are facing temporary Business problems, a business loan tenure of 6 months or more can give you the necessary buffer for resolving operational issues.
Lendingkart business loans promise zero hidden costs and charges. We only levy a one-time processing fee of 2-3% based on your loan ask and that’s all. This allows you to retain more of the principal amount for business growth.
Last but not the least, Lendingkart business loans can be repaid in monthly or bi-weekly EMIs. Our EMI options allow you to pace your repayments as per your invoicing and sales cycle, for example, if your sales are going great, you can repay your business loan two times faster with the bi-weekly EMI option.
Benefits of Business Loan by Lendingkart
Business loans from Lendingkart are enable you to redraw your business strategies for matching today’s agile work environments. Here are the benefits of taking a business loan from an NBFC like Lendingkart.
– Faster processing:
Faster processing means faster credit for your business, allowing you to explore new horizons and exploit opportunities as they come your way. A timely business loan can expand your marketing potential, speed up your operations, and eventually increase your profit margins.
– Preserving your ownership:
Since it is an unsecured business loan, you are at no risk of losing valuable assets or giving up precious company stock in lieu of investment. So, a Lendingkart business loan allows you to preserve your ownership while also providing you with the funds to grow your enterprise.
– Streamlines your cash flow:
Lendingkart business loans increase your window of opportunity by providing both capital and time for you to streamline your cash flow and get into profitable territory. These loans allow you to strike a balance between your Business fund and company capital fund by providing investment that can be repaid in instalments.
– Improve your credit score:
An NBFC loan from Lendingkart is the best way to improve your business credit score as we report loan accounts to all credit bureaus. Moreover, a business loan with Lendingkart is especially beneficial for companies witnessing a recent dip in credit score due to unforeseen market conditions.
|Customized Interest Rates||1.5 to 2% per month|
|Loan Tenure||up to 36 months|
|Eligibility Criteria||> ₹ 90,000 turn over for 3 Months|
|Loan Amount||₹ 50,000 – ₹ 2 crore|
|Installments||Flexible Monthly / Bi-weekly|
**Pre-closures are only allowed after the first EMI is paid in full
Eligibility Criteria for Business Loan
Lendingkart has kept the eligibility requirements to the bare essentials in order to process business loans faster. We do not require too many documents or unnecessary paperwork that can hold-up the loan approval process.
- An established business that has been in operations for more than 6 months.
- A minimum turnover of ₹ 90,000 or more in the 3 months preceding your loan application.
- The business should not fall under blacklisted / excluded list for SBA finance.
- The physical location of your enterprises should not be in the negative location list.
- Trusts, NGOs and charitable institutions are not eligible for small business loans.
Documents Required for a Business loan
|Proprietorship||Partnership||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) Trade License 5) Drug License 6) TIN 7) VAT registration
3 simple steps to your Business loan
Simply enter your personal, business and financial info to receive a business loan offer.
Upload digital copies of your documents in a single step process for verification.
Receive your business loan approval and disbursal within 3 working days.
Types of Business Loans
Most people have the misconception that only banks and government institutions can sanction business loans. The truth is, there are several type of business investments available in the market that can be considered as a business loan. It is important that a small or medium enterprise owner knows about these business loan types in order to get funding through proper channels for his/her company.
Here’s a list of six most common types of Business Loan for SMEs
Bank Overdraft / Credit Line:
This facility is available from both banks and online lenders. It allows a revolving credit facility, in which a businessman can withdraw money up to a sanctioned limit from their business account, even if the actual account balance is lower. The excess amount is considered as a business loan, which can be repaid by depositing the same, plus interest, in the account.
Business owners can also raise funds by divesting their share in the company in lieu of capital investment. While a popular choice in more advanced markets like the United States, equity funding is a less preferred option in Indian investment market by SMEs, as it accompanies the risk of ownership dilution. In case of equity funding, a business owner can retain the option for buy back of shares in order to get back to preferred ownership levels, once the investment objectives have been met.
These loans have a smaller-ticket size owing to the shorter repayment window. Generally, a short-term loan is given for a period ranging between 3 to 18 months as these loans are meant for working capital finance and limited capital investment. However, Lendingkart offers short-term business loans for a period of 1 to 24 months, increasing the convenience of credit for small and medium enterprises in India.
Equipment finance is a popular means of improving cash flow and working capital. Equipment financing is the use of a loan or lease for purchasing or borrowing hard assets. It is a type of secured business loan because the lender has rights over the equipment in case of a default.
Loan on Accounts Receivables
Also known as invoice financing, these are very short-term credits, given in lieu of accounts receivables. The shortcoming of this kind of business loans is that they can only be availed by SMEs with commercial customers. The loans tenure generally ends on the invoice due date and require full payment along with interest and processing charges.
Factoring / Advances
Under this arrangement the money is paid in advance by the factor company to the business for an accounts receivable. However, instead of paying the full amount, a percentage of amount, usually 70% to 90% of the invoice value, is paid. The rest is retained to cover unforeseen charges, breakage, delivery and quality errors. For this kind of business loans, both the buying and selling companies have to come onboard and work with a factoring company.
A supplier who has provided goods or services to your business, but is yet to be paid, is considered a trade 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 trade creditor can also be considered 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. One of the easiest ways to repay a business loan is through Equated Monthly Instalments (EMIs). Your loan is divided into equal fixed sums that are paid on a monthly basis till the full repayment of the loan.
An EMI consists of two parts, the principal loan amount and the accrued interest. Small and medium businesses find it easier to repay business loans with EMIs, as the method allows them to fund expensive assets and expansions without straining their smaller operating budgets.
NBFC loan providers like Lendingkart offer flexible business loan EMIs that can help you repay a business loan two-times faster by opting for bi-weekly repayments. With auto-renewal also on offer by Lendingkart, faster repayments mean quicker access to refinance for the same amount or a larger business loan.
How to Calculate Business Loan EMI?
The Business Loan EMI calculation is done on the basis of a simple formula i.e.
E = P x r x (1+r)n/(1+r)n-1
‘E’ is the EMI
‘P’ represents the loan amount
‘r’ stands for the interest rate offered on a monthly basis
‘n’ is the duration of the loan
A business loan EMI calculator is a digital version of this formula, that allows you to calculate EMI amount through a web interface. The 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 resource planning.
Do’s and don’t’s of Business loans
A business loan can be a great source of capital for the growth of your venture, but, it can also be a path to ruin if you do not plan certain aspects with care. SME loans tend to have a shorter repayment cycle, which means applying for too high a loan amount will inadvertently increase your EMI amount.
If your business runs into a period of low sales or your invoices get delayed, servicing the loan can become difficult and cause a debt pileup. Therefore, there are some things you should consider before applying for a business loan.
Have you explored all other options for managing your Business?
When you go for a business loan, it is because you need capital to fund a critical task. However, a business loan is not the only way to fund your working capital needs, asset acquisition or new business unit. You can also get the necessary investment by adopting cost reduction mechanisms, increasing production and sales to a limited extent, or by using the money in your contingency fund.
So, consider all your financial options carefully before applying for a business loan. Sometimes it may turn out that you did not need a business loan at all and have ended up with a commercial debt for no reason.
How do you intend to use the loan money?
Deciding how you are going to use the loan amount beforehand can put your business on the front foot, immediately after you receive the loan funds. The money can go directly into funding critical tasks. You can even pre-empt the operationalisation of your growth plans if you have previous working relationship with the lender.
For example, Lendingkart business loans can be renewed upon full repayment, so, you can start a new project immediately after finishing the current one, as your working relationship with Lendingkart will ensure a renewal. On the other hand, not planning ahead can sometimes lead to wastage of loan funds, as they get used for non-critical tasks. For example, you may end up using your working capital loan money for paying an existing debt or for purchasing plant and machinery, which will then create a void in your working capital funds.
Does it benefit your business?
Lastly, any form of capital investment should benefit your business. If you have a plan for repaying 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 think again about taking a business loan. So, sit with your financial planners, operational heads and other business advisors to chart a strategy for growth before you apply for your first business loan.
Business Loan FAQs:
Yes, we have a very fast loan-lending process with three steps. Application submission, Approval and Disbursal. This process takes a maximum up to three days while banks may take 8-10 working days.
On the other hand, we have very reasonable and lower interest rates. Also, we don’t require any collateral or property for security. It makes our loans unsecured and less risky for you.
We do not take any additional penalty for a loan foreclosure and there are no hidden payments and charges with our business loans.
The EMI is calculated using the simple formula:
Where,‘E’ is the EMI
‘P’ represents the loan amount availed
‘r’ represents the monthly interest rate
‘n’ is the duration of the loan