5 Interesting Facts About The Business Loan Process In India

The survival of an organization in this competitive climate relies on increasing revenue and profits. For a business to grow quickly, capital is vital—whether it’s to start up or to fund operations. However, if you don’t have the necessary funds to facilitate your business plans, business loans are the ultimate saviour.

A business loan is an amount you borrow to meet planned and unplanned expenses. Your company’s size and profit trajectory determine the amount you can borrow. If you’re looking to apply for a loan, here are a few facts to know about the business loan process in India.

Key Facts About The Business Loan Process In India

1. Your Loan Type Depends On Your Requirement

Business loans vary depending on the type of business and its eligibility requirements. Below are a few basic details about business financing:

• Term Loans

A term loan is where the lender disburses money upfront and you repay it with interest, based on a specified schedule.

Small businesses with a strong financial history are often good contenders for a term loan. Your business may need a term loan for acquiring fixed assets, purchasing commercial property, expansion, or meeting daily expenses.

• Equipment Financing

An equipment loan or machinery loan helps to finance the purchase or upgrade of equipment or machinery.

Usually, large companies and businesses in the manufacturing sector use equipment finance. Obtaining equipment finance or machinery loans can also provide tax benefits for a business. Depending on the lender, the interest rate, loan amount, and repayment period may vary.

• Business Line of Credit

Business Lines of Credit (LOCs) are revolving loans that provide access to fixed amounts of capital for short-term business needs. Businesses can use LOCs to finance inventory purchases, equipment repairs, marketing campaigns, and much more.

• Invoice Financing

Invoice financing refers to borrowing money against outstanding invoices from customers. As businesses wait for their clients to pay, they can use invoice financing to improve cash flow, pay employees and suppliers, and reinvest in their operations.

• Commercial Real Estate Loans

A commercial real estate loan is similar to an equipment loan. In this case, the loan is procured to purchase commercial property such as a manufacturing facility, warehouse, etc., where the commercial property acts as collateral.

• Micro Loans

Micro loans are short-term, small-capital loans available to businesses and individuals with fewer funds, micro enterprises, and startups.

2. Preparing The Required Documents Can Speed Up The Business Financing Process

Preparing the essential documents beforehand allows, you to expedite the business loan process in India.

Although the documents required may differ from one lender to another, the list includes the following:

• KYC documents – Identification and address proof for all borrowers and co-borrowers
• PAN cards of the borrowers
• Last 6 months bank statement of the business main operative account (you can provide a statement for 12 months to obtain a maximum loan amount).
• Term loan facility terms (signed copy)
• Credit assessment and loan processing may require additional documents

3. Following Some Precautions Can Help You Get Your Loan Approved

It's important to prove to the lender that you can repay the business loan to ensure that your business financing goes smoothly. There are a few ways to achieve this:

• Ensure your credit score is healthy
• Demonstrate adequate business cash flow
• Prepare your loan application documents in advance
• Ensure adequate insurance coverage

4. You Can Get A Business Loan Without Any Collateral

While many lenders require collateral when giving a business loan, it isn't a requirement for all lenders. Business loans from IIFL Finance are collateral-free and EMI-based. Without collateral or a guarantor, you can acquire business financing of up to Rs. 50 lakhs.

5. There’s No Best Time To Apply For A Loan

While business loans take minimal time for approval, there is no best time to apply for a loan. The best time to apply for a loan is when you need to facilitate your business plans.

Apply For A Business Loan By IIFL Finance

Businesses with small financial requirements can take advantage of IIFL Finance quick business loan. With IIFL Finance, you can avail yourself of lower EMIs, competitive interest rates, and a convenient repayment term that will help you grow your business with ease.

The application and disbursement processes are 100% online. You can also visit any IIFL Finance brand and apply for a business loan. You can reach out to our support team to assist you with any loan-related questions.

Frequently Asked Questions

Q1. How can you calculate your business loan EMI?
Ans. Using IIFL business loan calculator, you can identify the EMI amount you need to pay.

Q2. Why should you take a business loan?
Ans. A finance infusion can help your business gain momentum, whether it is just getting started or growing. IIFL Finance can help you address your financial needs, whether it's addressing working capital shortages, buying equipment, paying staff or vendors, and more.