Finance is one of the most important elements for every organisation to operate well.  Many of us have wonderful concepts that, if implemented, may result in the set up of brand-new businesses. The lack of funding is the only thing preventing the concepts from becoming a reality. Raising funds for starting your company would be a smart decision if you wanted to overcome these obstacles. There are numerous ways to finance your company. The best option, though, is to obtain a business loan. Now, many banks help entrepreneurs run their businesses. Business loans are simple to get and disburse quickly.     

We have made it simple for you to apply for a business loan in India if you also wish to. We have covered the eligibility requirements and documents needed for a business loan in this blog. To learn more, keep reading.  

What is a Business Loan?

A business loan is a capital your bank gives you to expand your company. You typically pay back the money in the form of EMIs together with interest and fees. The type of business loan you require will depend on your requirements, such as buying assets, covering essential operating costs, or having working capital. However, for all forms of business loans, the application process and eligibility requirements are the same.   

You may not know how to get started or what paperwork you'll need if you've never applied for a business loan. The conditions for funding may vary depending on the demands of different enterprises. The rationale also suggests that you will be able to assess the amount of money needed and the numerous goods available. 

Documents Needed for a Business Loan in India

1. Identity Proof 
 

• PAN Card
• Aadhaar Card
• Driving Licence
• Passport 
• Voter ID Card 

These documents must have your full name, address, age, and photo. 

2. Address Proof 
 

• Passport
• Voter’s ID 
• Aadhaar Card
• Electricity Bill
• Bank Passbook
• Driving Licence

These Documents must have your correct address identifying that you are a citizen of India. 

3. Ownership proof 
 

• Electricity Bill 
• Maintenance Bill with Share Certificate
• Municipal Tax Bill/Share Certificate

These documents prove that you are the owner of the property or you rent the property. You can give an agreement copy if you are using the rented property. 

4. Business Continuity Proof 
 

• Shop and Establishment Certificate
• Tax Registrations
• Service Tax
• GST Registrations

These documents prove that you are still operating the business. 

5. Bank Statement 
 

• This document serves as a record of your business transactions
• The most updated bank statements of six months are required

6. Income Proof
 

• The most recent tax audit reports are needed for this document. The most recent tax audit reports are needed for this document. You should also include your income, balance sheet, and profit and loss calculation.  

All banks typically demand these as part of the application process for a business loan in India; however, additional documents may be required depending on the bank’s policies. 

The eligibility requirements and documents needed for the business loan are the same. However, there are some loan options that the Government of India has offered to set up a startup company. Below is a list of them.  

The Loan Options Availed by the Government for Startup in India 
 

The Government of India has offered some loan options for starting a new business to encourage businessmen. They are:

• Mudra Loan Scheme 
• National Bank for Agriculture and Rural Development (NABARD)
• MSME Business loans
• Credit Guarantee Scheme (CGS
• Coir Udyami Yojana
• Sustainable Finance Scheme
• Atal Innovation Mission

Eligibility Criteria for a Business Loan in India        
 

• You must be a citizen of India 
• Your age must be between 24 and 65
• You must have been running your business for at least three years 

These are basic eligibility criteria in all banks for applying for a business loan in India. The approval of your loan, however, is contingent on a number of variables, including your CIBIL score, your source of income, how quickly you pay your taxes, and so forth. To make the approval process simple, you must also submit the appropriate documents.     

Things You Should Do Before Applying for a Business Loan in India
 

Whatever your scenario, there are a few things you need to know before applying for a bank loan for your company. 

1. Develop a clear plan 

Many banks demand that you have a thorough financial plan outlining the fundamentals of your business in order to receive a loan. It tells people a brief overview of who you are and what your business is all about. 

The company’s goal, mission, and operational procedures should be clearly stated in the strategic planning process in order to achieve all of the given goals. Recognise that a strong business model tells a lender that the business is likely to succeed.    

2. Determine the funds required
 

Doing your research is essential before applying for a loan so that you don’t overestimate the amount of money you need. This is due to the possibility of future financial issues caused by negligence. 

However, overestimation makes the bank question whether a thorough analysis was done before creating the business plan. Make an appropriate budget using precise financial planning to avoid these uncertainties.    

3. Check your credit score
 

Your credit history may contain errors from time to time, and if you do not keep track of them, they could have a detrimental effect on your credit score. As a result, it is usually a good idea to regularly monitor your personal and professional credit files. If you notice any issues, call a credit agency right away to fix them and raise your credit score by eliminating errors. If your credit score is low, no bank will approve you for a loan.      

4. Investigate every possible lending option
 

It is crucial to carry out research and prepare a list of banks willing to give the type of loan you require after checking your credit history and confirming that it is in good standing. Select the bank with the lowest interest rates and probably the most flexible clearance requirements.

5. Keep the accounting record updated
 

Getting a business loan in India from a bank is easier with accurate financial records. To determine if you will be able to repay the loan, lenders will always request you to evaluate your capital structure, cash flow records, and income statements. 

This suggests that if you haven’t been keeping track of these records, it’s time to start since they might be useful if you ever need to apply for funding.

FAQs
 

1. What are the types of business loans in India?
 

Ans. Working capital and term loans are the two categories into which business loans fall. Working capital is used to finance your company’s day-to-day operations. Whereas a term loan is used to buy machinery and equipment.               

2. What is the CIBIL score?
 

Ans. Your CIBIL score represents your credit history. It is a three-digit number with a 300-900 range. 

3. Is the credit score necessary for getting a business loan in India? 
 

Ans. Yes, credit score plays a major part when applying for a business loan in India.  

4. How much credit score do you need for a business loan?
 

Ans. To be eligible to apply for a business loan, you must have a CIBIL score of 700 or higher. Your bank may ask for additional security if your CIBIL score is below 700 before approving your loan. But the bank makes this decision based on its own terms. 

5. How to apply for a business loan in India?
 

Ans. A business loan can be applied for in three different ways:

• Through the lender’s website, online
• You can go to the bank branch that is closest to you
• Call their customer service line and provide the necessary information

However, if you want a business loan, we advise going to the branch office to apply for it.