All about Business Loan(s)

1
All about Business Loan(s)
2
What is Business Loan?

• A Business loan is primarily a loan that you use
  to grow your business by investing in capital
  expenditure or funding the working capital gap.
  In every business lifecycle, at some point or the
  other, you need to raise debt for growing it
  efficiently or for smooth business operations, by
  meeting its working capital requirements.

3
When is Business Loan needed?

• Business Loan can be used towards
• Daily capital expenses,
• Managing working capital gap,
• Specific project funding,
• Expansion of the business,
• Purchase of a new machinery,
• Capital to start a new business,
• Ancillary units for your existing business

4
Features Benefits

• Loan amount starts from Rs. 50,000 onwards.
• Simple and easy documentation process.
• Tenure for business loans ranges from 12 months
  to 60 months.
• No collateral or guarantor required.
• Accessible and Convenient As Government is
  focusing on encouraging MSMEs.
• Due to an increase in the number of NBFCs that
  are specifically targeting small business loans
  starting from as low as INR 50000 to INR 10
  lakhs.
• Competitive Business loan interest rates, which
  varies from 13 to 35 and depends on the
  eligibility of the applicant and the quality of
  business.
• Businesses opting for bank loans enjoy tax
  shield. The interest repaid on such loans is
  deducted from profits before calculating the
  tax payable to the Government.

5
Business Loan Eligibility

• A business loan can be availed with or without
  providing security or collateral.
• It depends on the bank and the amount of risk
  they are ready to take on a particular business.
• It also depends upon whether the loan is for an
  existing business or to start a new one. There
  are many banks NBFCs in India that offer loans
  for both small and big businesses.
• Getting approval disbursal is possible within a
  few days if you have all the essential documents
  and you meet the eligibility criteria.

6
Eligibility Criteria for Different Employment
Types

• Private Limited Company Net income of the
  applicant or the concern should be more than Rs.
  150,000 per annum (ITR) for a business loan of up
  to Rs. 15 lakhs and over Rs. 300,000 (ITR) for a
  business loan above Rs. 15 lakhs.
• Self-Employed Professionals Anyone who possesses
  a diploma or degree in any discipline and has his
  own practice is categorized as a self-employed
  Professional and can also apply for a business
  loan Arts/Engineering /Professionals e.g. Dental
  Surgeons, Accountants, Medical Practitioners,
  Engineers, Craftsmen, Management consultants etc.
  are examples of self-employed professionals.
• Proprietorship partnership firms The business
  should have a minimum turnover of Rs. 40 lakhs.
  Individuals who have been in the current business
  for a minimum of 3 years or with a total business
  experience of 5 years are eligible for this.

7
Factors Deciding Business Loan Eligibility

• Age Limit The age of a loan applicant must be
  between 21 to 65 years.
• Income The business should be profitable for a
  minimum of past 2 years.
• Turnover A minimum annual turnover of Rs. 15
  Lakhs.
• Co-applicants They are optional and are not
  compulsorily required in case of a business loan.

8
Customer Profiles, A Lending Institutions
Consider for Business Loans

• The eligibility criteria, interest rates,
  processing charges, tenure and other features
  extended by a bank will vary from customer to
  customer.
• Therefore, while applying for a business loan,
  check which category of customers you belong to
  and check your eligibility accordingly.
• Self-Employed Professionals This includes
  Chartered Accountants, Doctors, Company
  Secretaries, Architects and Designers etc. who
  are indulged in their own practices.
• Self-Employed Non-Professionals This category
  comprises of manufacturers and traders. Their
  eligibility criteria, documentation, interest
  rates offered, and loan tenure offered are
  different as compared to the self-employed
  professionals.
• Entities Limited Liability Partnership,
  Partnerships firms, Private Limited and
  closely-held Limited companies fall under this
  category. This even includes banks and NBFCs who
  are looking to raise funds from larger banks or
  NBFCs.

9
Documents Needed to apply for Business Loan

• A general list of documents and information
  required from you to process your loan
• General Documents Checklist
• Identity proof - Driving License/PAN
  Card/Passport/Voters ID card
• Address Proof (Ration card/latest telephone or
  electricity Bill/Passport/Trade license/Lease
  agreement/Sales Tax certificate)
• Bank statement for the last 6 months
• Proof of continuation
• Other Mandatory Documents such as Sole
  Proprietorship Declaration, Certified true copy
  of Memorandum Articles of Association
• Audited financials (signed by a CA) for the last
  3 years.
• Copies of IT returns for the last two years

10
Documents Needed to apply for Business Loan
Continued

• Self-Employed (Private Ltd. Co. and Partnership
  Firms)
• Proof of Identity of Private Limited Company
  Sales tax/VAT/Service tax/Excise registration,/IT
  return of the concern, Water/Electricity/Registrat
  ion under Shops and Establishment Act, PAN
  ID/Municipal tax bill in the name of the concern,
  Memorandum and Articles of Association.
• Proof of Individual Identity Proof to be
  submitted for the authorized signatories and two
  directors (which includes the managing director)
  (any one of the following) PAN card, Voters
  identity card, Driving license and Passport.
• Self-Employed Individuals Professionals
• Proof of identity of sole proprietorship Proof
  of identity of the sole proprietorship
• PAN ID/IT return of the concern or Municipal tax,
  Water, Electricity bill in the name of the
  concern
• Individual identity proof to be submitted for the
  sole proprietor Passport, Driving license,
  Voters identity card, Photo PAN Card.
• Proof of residence address for the sole
  Proprietor Driving license, Ration card,
  Passport, Voters identity card

11
Documents Needed to apply for Business Loan
Continued

• Self-Employed Individuals Non-Professionals
• Proof of identity of the sole proprietorship.
• Proof of individual identity.
• Three years income tax returns.
• Three years sales tax returns.
• Copy of periodic stock, age wise book-debt and
  creditors-statement for last three months.
• Copy of last 6 months bank statement of main
  banker/copy of bank statement for the term loan.

12
Interest Rate Charges

• The rate of interest applicable and tenure
  offered for the loan depends upon a number of
  factors such as
• Ones Credit Rating,
• The Profitability of the Business,
• Future Growth Potential of the Business.

13
Interest Rate Charges
14
Thank You !!!