Business loan definition and eligibility
To fulfil the financial demands is the first criteria to run any business successfully. It is also not possible for an individual or a business company to fulfil all the financial requirements of that firm. To meet this financial need, most of the banks offer business loan. For availing the business loan, applicant has to go through a certain procedure after fulfilling the basic eligibility criteria for the same.
What is business loan?
Most of the major business collapses in all time history are just due to the chief reason of lack of funds to further run that business. Finance is the major problem which most of the firms face in running their business successfully.
In simple language, business loan is the loan taken by the firm from a bank or financial company to fulfill the financial need of the company. On the basis of security, we can have the following types of business loan.
1. Secured business loan:
For secured business loan, you have to give a security to the bank against the loan amount. The main advantage of these loans is that you have to pay less interest on the loan amount.
2. Unsecured business loan:
In this type of loan, you don't have to give any security to the bank against your loan amount but the interest rates are higher than the secured type of business loans.
Also, we can divide the business loan on the basis of the tenure of repayment. An applicant can choose from one of the following types of business loans on the basis of his requirement.
1. Short term business loan These type of loans are meant to fulfil the sudden financial crisis. Company opt this type of loan if it can repay the loan amount soon after the financial crisis. The interest rate on the loans is slightly less than other.
2. Intermediate term business loan These are meant for those who are just starting their business and can repay the loan amount after the establishment of the business. This loan can be taken for either new construction or purchase of raw material etc.
3. Long term business loan long term business loan is the need of already established businesses which are making a fresh long term investment in their business. Repayment period of the loan is longer and so the interest rate.Eligibility for business loan
There are certain eligibility criteria which are fixed by the bank to avail the business loan. Here I am discussing the certain basic eligibility criteria to have business loan from any bank.
1. The minimum age of the applicant should be 21 years and maximum should be of 65 years at the time of application.
2. The minimum annual income or more precisely minimum profit after computing tax (PAT) of the firm should be Rs. 1.5 lakh.
3. The Company should be capable of repayment within 5 years of the sanctioning of loan amount.
4. The maximum loan amount which can be sanctioned is Rs. 2 crore.
5. Here is the list of documents required for business loan-
a) Applicant should have an identity proof. For identity, applicant can submit photo PAN card, driving license, passport or passport.
b) Applicant has to submit a residence proof. Ration card, utility bill, electricity bill, LIC policy receipt etc. can be submitted for residence proof.
c) Bank also requires your last three bank statements to verify your repayment capability.
d) In case you're applying for the secured business loan then you have to submit the documents of the property against which you are seeking the loan.