What is a Business Loan?
A person who wants to begin a new business or wants to expand their current business requires some funds to ensure their venture runs smoothly. Banks or lending partners provide these funds at a rate of interest and for a fixed tenure. Without a working capital the businesses won’t be able to function properly.
Types of Business Loan
There are two types of business loans:-
- Secured loans – In such types of loans, the entrepreneurs and individuals are required to offer collateral such as land, inventory, machinery, and others. In this type of loan, the rate of interest is quite less as there is no risk.
- Small business loans or Unsecured loans – In such types of loans, the entrepreneurs and individuals are not required to offer collateral such as land, inventory, machinery, and others. In this type of loan, the rate of interest is high as there is risk involved.
Eligibility for Business Loan
Below are the eligibility conditions for business loans:-
- Proprietors, Self-employed professionals, partnership firms and Private Ltd. Co. are generally involved in the services, trading or manufacturing business.
- Professionals that are in some business for about 3 years duration minimum, along with a minimum of 5 years in their total experience of business.
- People whose business is under profit for at least the previous 3 months with turnover of greater than Rs 90,000 – this minimum eligibility criteria is offered by us.
- The person applying for the loan must be 21 years old at least while applying for the business loan in Lucknow, and must not be older than 65 years during the maturity of loan.
Business Loan Offered by Us
Business Loans in Lucknow: Documents Required
The below mentioned documents are mandatory for the business loan in Lucknow:-
- PAN Card – For Individual or Company or Firm
- Below mentioned document are required as identity proof:
- Aadhaar Card
- Driving License
- PAN Card
- Voter’s ID Card
- Below mentioned document are required as address proof:
- Aadhaar Card
- Driving License
- PAN Card
- Voter’s ID Card
- Previous 6 months bank’s statement
- The latest ITR plus the income proof, profit & loss account and balance sheet for the previous 3 months, which may require a CA Certified/Audited if the turnover is greater than a certain limit.
- Continuation business proof – Trade license or Sales Tax or Establishment Certificate
- Some other mandatory documents – Partnership Deed Certified Copy, Articles of Association (Director certified) or Certified true copy of Memorandum and Resolution of Board (Original) if the applicant is not the sole proprietor.
Business Loan Repayment in Lucknow
One can pay the loan EMIs in the below mentioned ways:-
Standing Instruction or SI: This is one of the best ways for paying the due amount to the lender. Every month the mentioned EMI amount would be auto debited or auto paid to the lender at the end of a specific duration. It is a simple way and a good one if you forget to pay your EMIs every month. But the bank account needs to have a maintained balance.
ECS or Electronic Clearing Service: Another way to pay your EMIs is to opt for the ECS or the Electronic Clearing Service in which the lender bank can withdraw the EMI monthly for the specified duration from the bank account directly.
PDCs or Post-Dated Cheques (PDCs): One can submit various post-dated cheques needs which need to be submitted to the lender for the total duration of the loan tenure, for the specific dates as mentioned by the lender. It is applicable where ECS or SI facilities are not available. But it has a drawback, if one fails to have proper bank balance on the date the cheque comes for clearing it can attract penalty charges on both sides and can attract legal proceedings. Plus, if the EMIs are not paid on time, it can also lead to penalty charges.
Net Banking/UPI Payment/m-Banking – One can visit the lender’s website, go to the dashboard and pay the EMI using Net Banking/UPI Payment/m-Banking. For this one needs to remember to pay the EMIs on proper time.
Getting the Best Rate of Interest Rate on Business Loans in Lucknow
For getting the best rate of interest for business loans in Lucknow, one needs to ensure that they have a good business experience, higher income, good credit score and a good income source. It depends on lender to lender and their terms for business loans. We offer business loans at an interest rate of 1.5 to 2% monthly.
Factors Affecting the Rate of Interest in a Business Loan in Lucknow
Since the business loan is given to any entrepreneur who wants to expand their business and has a turnover greater than Rs 90,000. Different lenders have different criteria and different terms to calculate their interest rates for their customers. After the basic evaluation of the tenure, loan amount and other factors which lie in the authority of the lender the loan is approved.
Some of the basic factors are:-
- Credit score of the person or the owner’s credit score
- Business Type: Partnership, Proprietorship, Public Limited or Private Limited
- Business’s turnover
- Business’s Profit
- Business Cash Flow
- Business Track Record
Comparing the loans
While applying for a business loan, one point to be noted is that a loan should not be taken just because of shortage of funds. Instead, prior to taking a loan, a proper analysis should be done to justify the loan taken and only then can the loan amount be utilized effectively. Given below are some factors that need to be considered prior to applying for a business loan.
- Does your business actually require it – The question that need to be asked is why does your business need the loan for, where is the money going to be utilised, don’t you have any other options than a loan – All these points need to be looked upon before applying for a loan
- The loan amount – The total loan amount that the applicant needs to for the business and the total spread of the business costs
- The interest rates – Basically there are two types of the rates of interest. They are:-
- Diminishing Rate of interest
- Flat Rate of interest
- Prepayment charges – One should compare the loan based on the prepayment charges which are levied by the company. Ensure they are nil or zero prepayment charges.
Business Loans in Lucknow for Women Entrepreneurs
For encouraging women in participating in entrepreneurship and business, the lenders have come up with some business loans made for women. There are various schemes made for women to help them become successful. Such schemes offer lower interest rates and minimal documentation.
Application for Business Loan
Below mentioned are two ways for applying for business loan in Lucknow:-
Online: One can apply for the loan online by visiting the website of the lender for the business loan. The person just needs to enter their personal details, business details and bank details. After filling up the form one needs to upload the documents and click on submit. After a few days, the applicant will be informed soon.