Generally, people need funds to raise funds for their businesses. Learn how you can raise business loans from various sources and check business loan eligibility.
There are ample opportunities for getting a loan for business purposes in India, whether loans are provided by the government of India or loans from banks and financial institutions. Let us look deeper into the various sources for getting a business loan and check business loan eligibility.
Let’s firstly get to know about business loans provided by governments and check business loan eligibility.
The government of India has developed several credit programs, including the following, to support the MSME (Micro, Small, and Medium Enterprises) sector, which is most important to the growth of the Indian economy.
1. MSME Loan within 59 minutes
Usually, when they most need the money, people struggle to raise funds for their enterprises at the appropriate time. With this post, we’ll show you how to obtain business loans from various sources and determine whether you match the requirements for loan approval.
People frequently struggle to raise capital for their businesses at the right time, when they most need it. In this article, we’ll explain how to apply for business loans from a range of sources and check to see whether you meet the criteria for loan approval.
Benefits of MSME Loan:
- Minimal documentation and quick process
- Technology based loan driven system
- Security of data as government sources provide high-end privacy protection
2. Pradhan Mantri Mudra Yojana (PMMY)
Micro Units Development and Refinance Agency Ltd i.e., MUDRA provides re-financing support to banks and NBFCs for lending to Micro units having loan requirements up to 10 lakhs under the scheme of Pradhan Mantri Mudra Yojana(PMMY). It covers 3 categories i.e., Shishu, Kishore, and Tarun to signify the stage of growth and development.
Presently, the purpose of a Mudra Loan is not to develop small units but it is offered as:
- Business loans for vendors, traders, shopkeepers, and other services activities
- Working capital loan through Mudra Card
- Loan for agricultural or farm vehicles
- Equipment finance for micro units
Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGFMSE)
This is a government business loan scheme launched by the Indian government allowing collateral-free credit to the MSME sector. It includes both existing as well as new enterprises. The guarantee cover is available to the extent of a maximum of 85% of the sanctioned amount of the credit facility.
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Business Loan From a Non-Government Organization
After learning about government-provided business loans and their eligibility conditions, we now move on to other business loan opportunities and review their eligibility standards.
While lending, all lenders adhere to these 4 fundamental principles. Every businessman should be aware that there are four essential eligibility requirements to pass before applying for a loan.
1) Credit Rating
Your credit rating shows your loan repaying capacity. A good CIBIL score is key and improves your chances of getting an unsecured loan or loan on better terms and conditions. There are a few measures you can take to improve your rating.
- Avoid Default on credit card bills and other repayments
- Clear all your existing debt on time
- Aim to borrow a mix of credit options, such as secured and unsecured
- ensure that your credit report is accurate and updated at a regular interval
2) Annual Revenue
To get business insight, every money lender looks forward to an accurate financial statement of the past 2 years on hand. Use the same to analyze business position loan repaying capacity like current ratios to analyze business loan repaying capacity. This signifies if the current ratio is greater than on company’s ability to pay all its bills and inventory turnover ratio, operating cash flows that specify business. The lender calls income tax return to verify your financial statement.
3) Updated Business Plan
every lender is eager to know about your vision goals and business plan to analyze the risk involved in the business. At this step, projected financial statements and financial report
4) Additional Collateral
Each lending source must reduce the risk they take while extending credit. One way they accomplish this is by obtaining an additional financial guarantee that, if your company is unable to make its payments, will be used to cover the advance. This is typically done with an organization’s accounts receivable, hardware, or other easily commoditized resources. One of the additional options for a business credit might be for the owner of the company to guarantee their credit personally or make additional guarantees like personal land or other financial assets.
One can apply for a business loan if you fit the following criteria:
- Individuals working for themselves, business owners, private limited corporations, and partnerships working in the manufacturing, trading, or service sectors
- The company should make at least ₹40 lakhs in revenue
- people with a minimum of 3 years of expertise in the current industry and 5 years’ worth of overall business experience
- Those whose businesses have generated profits during the past two years
- The company should make at least ₹1.5 lakhs (Minimum Annual Income, ITR) annually
- The borrower must be at least 21 years old when applying for the loan and not more than 65 years old when it matures.
Click to: Apply for Business Loan
Conclusion
In this article, we have had a glimpse about all popular non-government as well as available government loan schemes with which you may get some help. Also, check your eligibility and requirements for the business loan before directly applying for the same.
FAQs
1. Which Businesses Are Eligible For The MSME Loan?
Businesses which are fulfilling the eligibility criteria are valid. These are:
- Revenue
- Repayment capacity of the borrower
- Existing credit facilities
- Other criteria led by financial lenders
2. Who Is Allowed To Take a Business Loan?
- If the entity is a private limited or limited company, The net yearly income of the firm must be greater than ₹1 lakh fifty thousand for loans up to ₹15 lakhs, and it must be greater than ₹3 lakhs for loans exceeding ₹15 lakhs
- To be eligible for the loan, a self-employed professional must meet the requirements for education and experience. You can see a list of requirements online
- For a proprietorship business or a limited liability partnership, the business needs to have profit and loss statements to satisfy the lender’s minimum requirements. Before approving the business loan, we evaluate the borrower’s capacity for repayment.
Read more :
- Business loan requirements in India
- How to get a startup business loan in india
- Government Business Loan Schemes
