Saturday, April 13, 2024
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Business Loans

Business, however small or large, it is bounded by financial wag. All businesses require some form of financing. An essential part of beginning or expanding a business is raising sufficient capital. Be it a new product launch or the time of recession, the expenditures can't wait till the payments come. In such situations, business loans alleviate your way and open the world of new business heights for you.

Business loans can be termed as a popular category of loans offered by various banks to self employed professionals, firms or corporate. The main aim of a business loans is to help them to start or expand their commercial activities. The quantum and interest of  loan may be vary from bank to bank. Generally, no security is required for business credit up to a certain limit. Above the limit, there require a collateral security or a percentage of business loans as margin, in the form of fixed deposit in the bank. Business loans are similar to an overdraft and are available like a limit on current account.

Types of Loans :

Business Loans come in many type hence it is essential for a businessman to know exactly what type of loan is best suited to meet his needs. Business Loans are mainly in two types: Professional Loans & Trade Loans.

Professional Loan :

Leading Banks offer Professional loans to self employed professionals like Doctor, Chartered Accountant, Interior Decorator, Architect, Company Secretary, etc for the purpose of purchasing equipment, repairing or renovating existing equipment and/or for working capital requirements or clearing up the existing high cost debt from other banks. Professional loans are unsecured in nature and will not be given to manufacturing, trading or industrial units. The quantum of loan varies from Rs.25,000/- to Rs.25 lakhs depending up on the age of the applicant, financial backgrounds, repayment capacity, tenure of the loan (maximum 5 years), etc. The interest rate is calculated on diminishing balance, the fixed or fluctuating basis. The repayment is made through EMI and in some cases, a collateral security has to be provided for limits above Rs.25,000/-.

Documents which are required for Professional Loans are:

  1. Loan holder should submit his Proof of Identity ie; Copy of his Passport or Voters ID Card or Driving License.

  2. He also to submit his Ration Card or Telephone bill or Electricity Bill or his Passport for the Address Proof.

  3. Latest 6 months Bank Statement  or Bank Passbook.

  4. Latest Income Tax Return, along with computation of income.

  5. Balance Sheet and Profit & Loss Account for the last 2 yrs, certified by a Chartered Accountant.

  6. Qualification Proof of the Highest Professional Degree.

  7. Trade license /Establishment /Sales Tax Certificate for the Proof of Continuation of his profession.

  8. Other Mandatory Documents: As a Sole Proprietorship its Declaration, As a Partnership its Copy of Partnership Deed, Apart from Copy of MOA, AOA & Board Resolution etc.

  9. Finally two passport size photographs also to submit.

Banks Offering Professional Loans:

Trade Loans :

Even if its the time of recession or not, most of the traders or businessmen need financial support to begin a new business or expanding the existing one. They might be in need of a heavy investments so banks are now ready to provide trade loans. Just like the professional loan, the amount of loan offered to them is depending up on age of the customer, financial background, repayment capacity, tenure of loan etc. Credit line may be in the form of overdraft or term loan. The maximum period and amount can be offered is 5 years and Rs 100 lakh respectively. Trade loans is repayable through Equated Monthly Installments or EMI. In few cases, a collateral security in the form of mortgage of land and building will be required. Apart from that, National Savings Certificates, Government Bonds, Bank's Term Deposits, Assignment of Life Insurance Policies, Approved Shares & Bonds (in the name of borrower/proprietor/partner/director) are also acceptable. Interest rate is fixed on the basis of prime lending rate but varies from bank to bank as per their policies.

Documents which are required for Trade Loans are:

  • Proof of business existence for at least two years.
  • Financial Statements including Balance Sheet and Profit & Loss Statement for the last three years.
  • Proof of residence.
  • Proof of place of business.

Banks Offering Trade loan: