Everything You Need to Know About Getting a Business Loan Online

What Is A Business Loan

A business loan is a type of unsecured loan that can be used to develop an existing or new business. Whether it is to expand your business to new locations, purchase advanced machinery, hire new staff or clear existing debts, a business loan is a good choice. Many banks and non-banking financial companies (NBFCs) today provide business loans at competitive interest rates. You can apply for business loans online itself nowadays from the comfort of your own house. 

Types Of Business Loans

Depending on the requirements and needs of your business, many types of business loans are available.

  • Start-up Business Loans: If you want to start  your own business and need financial help, you can apply for a Start-up Business loan. You can also get this loan if you want to expand the operations of your start-up venture.
  • Working Capital Loans: With this type of loan, self-employed individuals can take care of the daily expenses of the business. This includes purchasing machinery, paying short-term debt and managing steady cash flow. In short, it will take care of finances associated with daily operations.
  • Machinery Loans: It can help you with expenses related to buying new business equipment. You can purchase new machinery, repair faulty equipment and even upgrade existing ones.
  • MSME and SME Loans: With this type of loan, you can finance requirements of the business like buying machinery or raw materials, revamping the company’s infrastructure and expanding the business.
  • Women Business Loans: Banks and NBFCs offer business loans especially for women to help women entrepreneurs become self-sufficient and to ensure the growth of their enterprise.
  • Term Loan: This type of loan can be unsecured or secured depending on the lender’s terms. This loan typically ranges for a period of 1 to 20 years. The amount that is offered by the finance institution depends on the creditworthiness of the business.

Documents Required For A Business Loan

  • PAN card for individual, firm or company
  • Proof of ID- Copy of Aadhar card, Voter’s ID copy, Passport copy, driving License.
  • Proof of address- Copy of Aadhar Card, Voter’s ID copy, Passport copy,  Driving License.
  • Latest ITR along with balance sheet, P&L account and  computation of income for the last two years. All financials must be CA audited or certified.
  • Bank statement (last 6 months)
  • Proof of continuation (Establishment/ITR/Sales Tax Certificate/Trade License)
  • Certified copy of Partnership Deed or Sole Proprietorship Declaration.
  • Certified copy of Memorandum and Articles of Association.

How To Apply For A Business Loan Online

A number of banks and NBFCS give their prospective clients the option of applying for a business loan online through their official websites.The step by step process of applying for a business loan online is mentioned below-

  • Visit the lender’s website, click on the loan product that you want to apply for.
  • Click on the ‘Apply Now’ button. You will now be redirected to another page where you have to fill in the necessary details like name, age, type of business, details of your business, etc.
  • Click on ‘Submit’ to submit the online application. 
  • A representative from the financial institution will reach out to you to take the application processing forward.
  • Once the loan application undergoes verification and gets approved, the loan amount will be disbursed into your bank account.

How To Calculate Business Loan EMI

Business loan EMI calculation can be done using this following basic formula-

E = P*r*(1+r)n/(1+r)n-1

where,

‘E’ is the EMI

‘P’ is the amount that is borrowed

‘r’ is the interest rate per month and

‘n’ is the loan duration

Or you can also use online business loan EMI calculators that does this calculation for you. Business loans EMI calculators allow you to understand every component, including the principal loan amount and interest rate. In simple words, you can make your financial planning based on the calculations quite effectively.

Things to Consider When Applying For A Business Loan

There are a few things to keep in mind before you apply for a loan. A few of these are-

  • Work out the loan amount needed: The loan amount offered by the lenders to self-employed individuals/business owners is higher than normal loans. However, it is best not to borrow more than what is needed as it makes the repayment a hassle.
  • Look at the types of business loans: A lot of financial institutions have a variety of business loans in their product portfolio. These have varied loan amounts, loan tenors and repayment options. Therefore, based on your requirements, choose the best option available.
  • Check your creditworthiness:  Credit scores show your creditworthiness. Business owners who have good credit scores are considered less likely to default. Financial institutions usually check this before approving your loan application. Therefore, before applying for a loan, check your credit score and take steps to improve your credit score if it is less.
  • Check the additional charges: There are extra charges that are levied on business loans including processing fees, part-payment fee, documentation charges, default fee, etc. Make sure to account for these also when you are looking to get a business loan.
  • Know the repayment terms: The amount that is borrowed in the case of business loans are mostly repaid through Equated Monthly Installments (EMIs). Financial institutions take your repayment capacity and formulate a repayment plan. Make sure you understand the lender’s terms and conditions before taking a loan.

Businesses that need immediate financial help can take advantage of this loan service. You can grow your business with this, but make sure to do your own research and choose a business loan that has lower EMIs, competitive interest rates, and convenient repayment terms.