Business Loan in Rajkot

Rajkot is one of the largest cities in the state of Gujarat. This place is quite well known for its watch industry, jewelry market and other such markets. There are around 65,000 plus MSMEs making this city as one of India’s major industrial hubs. With so many opportunities in the city, there are many leading banks that are offering business loans in Rajkot.

Business loans – Explained

A loan given to any person for starting a new business or for expansion of their existing businesses is a business loan. In other words, the funds required by any person or an individual for running their business at a rate of interest which is decided by the bank and the applicant for a fixed tenure is called a business loan. Without appropriate funds a business cannot run efficiently.

Types of Business Loans

There are basically two types of business loans. They are secured and unsecured business loans.

  1. Secured loans – In this type of loan, entrepreneurs or individuals need to provide some collateral such as land, inventory, machinery or some guarantee. For such loans the rate of interest would be quite less.
  2. Unsecured loans – In this type of loan, entrepreneurs or individuals need not provide any collateral such as land, inventory, machinery or some guarantee. In this case the rate of interest is quite high as the risk is very high.

Reasons why people take Business Loans

Listed below are a few reasons for taking a loan for business:-

Expanding Operations:

Buying a piece of land or leasing a property with a view to expand business operations at the time when one feels that his business has reached a stage of rising up the ladder of success, this is an opportunity one does not want to let go, then he can opt for a business loan.

Purchase Equipment:

Technology has turned out to be the main driving force in today’s age of informative business.  Technology always comes with a pre-defined expiry date, so there is always a need to buy or upgrade existing technology and related equipment.  Loans can be used for purchasing / replacing/ leasing new equipment that are bound to improve the overall production or daily operations of the business organization, alternatively the equipment can also be leased. Loans taken at this point serve the purpose. 

Learn More – Machinery Loan

Purchase of inventory:

Generally small businesses often need immediate capital for purchasing inventory stock or raw materials. Sometimes they may face a situation when suddenly the demand for their products in the market may shoot up. At this juncture businesses might not have the required funds to buy the raw materials needed to meet this rise in demand. Such problems can be quickly solved when these small entrepreneurs take loans to purchase the inventory needed for increased production.

To increase working capital:

Often small businesses may not own enough working capitals needed to run their daily activities. Then they might opt to take short term loans until their own assets start earning enough revenues that can meet their operational needs.

Improve credit history:

If a business is looking forward to approving a larger loan, it is required of the company or organisation to have a good credit history. So to do this the proprietors look forward to getting short term loans and then paying back these loans on time in order to improve their credit history.

Higher Chances of Getting a Business Loans in Rajkot

For higher chances of getting a business loan, one must pay attention to the credit worthiness and also on the extra cash which can be used as working capital.

For all kinds of loans, the banks or NBFCs will first look at a person’s business records and financial statements for determining the credit worthiness of any company which is one’s ability to repay the debts and the reliability. Depending on the tenure, interest rate and amount the loan category is determined namely overdraftsterm loansletter of credit and bill discounting.

As business loans are generally given to people who are running one’s own business, the dispersal of loan amount would also depend on one’s credit score. Most of the lenders treat credit score as one of the important factors for lending since it gives them an idea of how much credit worthy that person is. So, it is generally stressed that all aspiring business owners and applicants for improving one’s business must keep a check on one’s own credit score.

Lenders for Different Business Loans

Many banks and NBFCs offer different kinds of business loans in the city. The entrepreneurs can find out different types of lending partners as per their needs. Generally the rate of interest lies between 12% to 32% and the tenure generally varies from 1 to 5 years upto a maximum of 15 to 20 years. The processing fee is around 2% in which GST is also charged. The loan amount also varies from fifty thousand to one crore.

Eligibility for Business Loan in Rajkot

The loan for business is offered to a person who has a proper business and also has a good turnover. Although different banks and lending partners have different criteria for validating a person’s business. But after the basic evaluation of the amount of loan, interest rate, tenure and other parameters, the loan is under the authority and purview of the bank. Some of the other parameters which are considered are mentioned below:-

  1. Business type such as partnership, proprietorship, public limited or private limited
  2. Business’s turnover
  3. Profit by different businesses
  4. Flow of cash flow in the business
  5. Business track record

Comparing the Business Loans

One can find the ideal business loans for them using the following parameters:-

  1. Business’s requirement
  2. Tactical or strategic business decisions and needs
  3. Amount of loan
  4. Rate of interest
  5. Prepayment charges
  6. Processing fee

For those who want to pay their loan utilizing their full tenure, then one must choose a loan with one of the lowest interest and processing fees.

For those who want to pay their loan before tenure ends then one must compare using prepayment charges as the parameters.

Some Special Scheme for Women Entrepreneurs

For encouraging women entrepreneurs and bringing out the best through WSH or Women Self Help Groups, there are certain schemes specially from women entrepreneurs. It has led to an increase in the number of businesses owned by women in the previous decade. Some of the schemes are

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

Business Loan: Documents Required

Below mentioned are some of the documents required for the KYC. The actual documents required may vary from lender to lender (NBFCs or bank). Below mentioned is a list of general documents required by the bank:-

  1. Proof of ID – Voter Card, Aadhaar Card, Driving License, or any other government issued identity certificate.
  2. Address Proof – Electricity bill, Aadhaar Card, Driving License, Passport, or any other government issued identity certificate.
  3. Continuity of Business Proof
  4. PAN Card
  5. Statement of bank for previous six months.
  6. Board resolution for companies only
  7. Statement of Computation of Income or ITR – for previous two years
  8. Audited loss and profit account statement or CA Certified for more than forty lakhs plus an audit report with schedules of loss and profit and sheet
  9. ITR of all the co-applicants – For previous two years
  10. Balance sheet for past 2 years
  11. Proof of ownership for office or residence.

Defaulting in Business Loan

Most of the lending institutions have their criteria for defaulting on loans. Along with the decline of credit score one can may have to face the following:-

Secured loan

For secured loans, the bank will have the right to seize the collateral using it as a compensation after some proper warnings that need to be given by the lender to the defaulter. The time between seizure of collateral and warnings differs from bank to bank.

Unsecured loan

For an unsecured loan, the bank would generally increase their rate of interest and or charge a heavy penalty till all the dues are properly paid. If further the repayment stops completely after a fixed period of time, the bank may transfer this issue to another collection agency. Further if the loan could be cleared by using a collection agency then the lender might take some legal course.

So to avoid such issues, before taking a loan one must seriously consider their credit history and their partner’s credit history before borrowing the loan amount.

Applying for a Business Loan in Rajkot

Offline Process:

The person needs to visit the office of the lender and following the steps below:-

  1. Go to the lender and talk about one’s business loan along with all the documents and their photocopies.
  2. Fill up the application form and submit it to the bank’s branch.
  3. Stay in contact with the official for updates on the loan or if the bank or the lender needs more documents.

After proper verification, the loan is disbursed. But this process is a bit tedious.

Online Process:

The person needs to go to the website of the lender.

  1. Go the loan section of the lending website
  2.  Fill up the KYC details and loan application form and attach the document copies.
  3. The loan approval status will be sent to one’s registered mobile number and email address.

This process is faster and more convenient.

We offer competitive interest rates along with lower processing fees for the loan amount as per one’s needs with minimal documentation process and quick loan disbursal.

Business Loan in Rajkot FAQs:

1. Is credit score mandatory for a business loan?

Yes, credit score is mandatory for a business loan.

2. What should be the age of a person while applying for a business loan?

The minimum age of a person while applying for a business loan must be 21 years.

3. Are there any pre closure charges for paying off the loan amount earlier?

No, we do not levy any pre closure charges.

4. Can one use the business loans for other purposes?

No, one cannot use the business loans for other purposes.

5. Can a person increase the credit limit of a loan?

Yes, one can increase the credit limit of a loan by talking to one’s lender.

6. What should one do if their credit score is not good?

One should ensure timely repayments and pay all the debts for improving their credit score.

7. Should a person have some income before applying for a business loan for starting a new business?

No, if the person is choosing to start a new business venture, then his/her income is not required. It is advised to have an earning partner.

8. Should a person have some income before applying for a business loan for an existing business?

Yes, a person should have some income before applying for a business loan for an existing business.

9. What happens if a person defaults on a business loan who is the sole proprietor of the business?

If a sole proprietor defaults on the business loan, then the lender can seize the person’s personal assets like property, car, etc.

10. What is the general tenure for a business loan?

The general tenure for a business loan is one to five years.