Business Loan in Coimbatore

Coimbatore is a city of historical significance and a distinct culture in the southern state of Tamil Nadu. It is known for its textile industry and is popularly known as Manchester of India. 

The city has been in existence since the 3rd century AD at the time of the Chola kingdom. Situated on the Western Ghats, the city is a tourist magnet for travelers from India as well as abroad. 

The city is one of the fastest-growing Tier-II cities in India and has a robust infrastructure like all metropolitan cities for education, healthcare, banking, etc. 

If you are looking for business loans in Coimbatore and are wondering what is the eligibility for the same, read on.

What are Business Loans

Business loans are basically sums borrowed from banks and NBFCs to be used as capital for investment in an existing or new business setup. 

Business loans can help organizations grow their infrastructure, plant and machinery as well as maintain their day-to-day operations. 

Business loans nowadays are customized to meet the exact needs of SMEs and start-ups. There are two types of business loans in India:

  1. Secured loans: Secured loans are the ones where the borrower provides collateral against the sum borrowed. 
  2. Unsecured loansUnsecured loans are sums borrowed by an individual without any need for collateral. The rate of interest of unsecured loans is higher than that of secured loans.

Interest rate

Min: 11.90% p.a., Max: 30% p.a.

Loan amount

Min: Rs. 30,000/-, Max:Rs. 2 crore

Repayment tenure

Up to 60 months

Why are business loans beneficial?

Business loans benefit a business in a number of ways:

1. Business expansion

Whenever a business reaches a certain stage where it has to grow or expand, it would need capital to do so. Business loans can help a company to grow their business operations as they want to.

2. Increase working capital

Many businesses may also fall short of funds to carry out their day-to-day operations. A business loan is a viable option to source funds for the smooth functioning of your business. 

3. Purchasing equipment

Another reason for taking a business loan may be to upgrade the current plant and machinery. The equipment depreciates every year and so it may be a good idea to buy, rent or lease new machinery to improve production efficiency. – Know more  – Machinery Loan

4. Purchasing inventory

Many sectors require immediate capital to procure raw materials or inventory stocks. Sudden fluctuations in the market may see prices of some of these raw materials escalate, in which case a business loan can help a business to buy the raw materials they need for production. 

5. Improving credit history

A business loan also improves the credit history of the business with consistent and on-time payments.

Eligibility for business loans

Although different banks have different criteria, business loans are offered to enterprises with a good turnover and CIBIL score

Every bank and NBFC evaluate the business performance and then decides the tenure, loan amount and interest rate. The lender also reserves the authority to refuse a business loan if your business does not fulfill any of their criteria. 

These are some of the general criteria that lenders take into account:

  1. The applicant should be an Indian resident
  2. Applicant should be self-employed with a minimum of 3 years of business experience
  3. Applicant should be a minimum of 21 years of age
  4. Has to provide information on business turnover and IT returns for the last 2 financial years
  5. The Business should be operating in profit for the last 2 years.

Documents required to apply for a business loan

Following are the documents required to apply for a business loan:

1. Identity Proof

Aadhar Card, Voter ID, Driving Licence.

2. Address proof

Voter ID, utility bills.

3. Bank statement

For the previous 6 months

4. Financial Documents

Business Income Tax Certificate, Balance Sheet, P/L statement.

5. Proof of business

Trade license, registration certificate, establishment license.

Business loans in Coimbatore

You can opt for business loans in Coimbatore from banks or NBFCs, as per your preference. 

With banks, you can avail of a secured or unsecured business loan if your CIBIL score is 650 or more. NBFCs generally grant collateral-free loans but charge a higher rate of interest in return. 

There are many more banks and NBFCs offering business loans in Coimbatore. You can check them online and compare them to find the best plan for your business.

Steps to apply for a business loan 

You can apply for business loans in India via online and offline mode. 

Online:

  1. Visit the official website of the lender
  2. Select business loans in the menu section
  3. Download the application form and fill in the details
  4. Submit the application form 
  5. The application will then be verified by the lender
  6. If the loan is approved, the amount will be credited to the applicant’s account in 5 working days.

Offline:

  1. Visit the nearest branch if the lender
  2. Ask for a business loan application
  3. Fill in the details with the attested form and submit all required documents
  4. Lender will verify the information furnished
  5. Lender would disburse the amount if the applicant is found to be eligible.

Benefits of Business loans

There are numerous benefits when it comes to applying for business loans. Some of them are:

1. Easy availability

Business loans are easily available through banks and NBFCs. Though the credit requirement of banks may be a little stringent, one can get loans easily from NBFCs with more relaxed criteria.

2. Hassle-free application process

Business loans require minimum documentation and involve a hassle-free process for loan applications. 

3. Flexible repayment options

Banks and NBFCs are flexible when it comes to the repayment of business loans. The borrower can repay the loan using their preferred method by reducing EMI or availing of other options.

4. Helps in managing the business

As mentioned earlier, every business requires capital to function. These loans can be used to expand a business or its area of operation and gain a competitive edge in the market. Moreover, most lenders do not require businesses to spend the funds in a specific way, leaving them with complete freedom to allocate the funds as per their own needs.

5. Tax benefits

Interest paid on any business loan is eligible for Income Tax deductions along with other tax benefits for businesses.

What are the kinds of business loans in India?

Following are the types of business loans in India:

  1. Agriculture loan
  2. Small business loan
  3. Credit Guarantee Scheme for Start-ups (CGSS)
  4. PM Street Vendor’s AtmaNirbhar Nidhi
  5. Dairy Farm Business loans
  6. Start-up business loans
  7. Working capital loan
  8. Business loans for women

Are there any special schemes for women entrepreneurs?

Yes. There are many special schemes for women entrepreneurs. Some of them are:

  1. Annapurna Scheme
  2. Stree Shakti Package
  3. Bhartiya Mahila Bank
  4. Dena Shakti Scheme
  5. Udyogini Scheme
  6. Cent Kalyani Scheme 
  7. Mahila Udyam Nidhi Scheme

What are the different kinds of business loans that I can avail?

Here are some types of loans that your business can apply:

  1. Term loan
  2. Loan against POS
  3. Line of credit
  4. Vendor financing

What are the advantages of taking loans from NBFCs?

The benefits of taking a loan from NBFCs are:

  1. Minimal documentation 
  2. Quick disbursement of loan
  3. Apply both online or offline
  4. All charges are transparent
  5. EMI calculation can be done by the borrower
  6. Collateral-free loans

Why are business loans necessary?

Business loans are required due to:

  1. Growth of business
  2. Purchase of plant and machinery 
  3. Increase working capital 
  4. Purchasing inventories
  5. Improve credit line

Business Loan in Coimbatore FAQs:

1. How to get a business loan with bad credit?

To obtain a business loan, it is imperative for the applicant and the business to have a good credit history. If your or your business's CIBIL scores are not 650 or above, it is advisable to work on improving it before taking a loan. Make sure all your personal and business dues are paid. If the need for capital is urgent, you can take a loan from a NBFC.

2. How can I get a loan for my start-up business?

Entrepreneurs looking for capital for their business can take business loans from banks or NBFCs depending on the credit profile and loan amount that the borrower requires.You can either apply online by submitting the application form and required documents on the website of the lender. You can also visit your nearest branch and submit the form and documents manually.If you have a bad credit score, you can try to obtain a loan from an NBFC by following a similar process as aforementioned.

3. Are unsecured loans safe for small businesses?

Unsecured business loans are favourable for small businesses as they do not require any collateral or guarantor. In case of a default in repayment, the lender cannot seize the personal assets of the borrower.Moreover, unsecured loans are not huge sums, as larger sums do require some form of collateral. This is why unsecured loans are suitable for small businesses.

4. Can I repay my business loan faster?

Banks do not charge any prepayment penalty to the loans taken on floating interest rate. Therefore, loans with floating interest rates do not incur any prepayment penalty.However, with a loan of fixed interest rate, there is a 5% prepayment penalty that will be charged.