The process and ease of getting bank loans for different enterprises
31 January, 2023
Business Loan can come in handy for all types and sizes of companies. These loans can be used to cover small expenses like advertising and marketing or big ones such as a takeover, inventory upgrade, business expansion, and more. Regardless of the need or the size of the company, getting a Business Loan takes just a few simple steps. Let's see what these are.
Loans for SMEs
Small and Medium-sized Enterprises (SMEs) often need help getting working capital, purchasing equipment, etc. The loan amount is relatively low as these businesses are not well-established and are still in the growing stages. These can include partnerships, proprietorships, etc.
Documents required
SMEs will need to produce the following documents while applying for a Business Loan:
The previous year's business Income Tax Returns (ITR)
Sales tax returns
GST documentation
Bank account details of the company
Bank statement for the past six months
Business registration
Personal letters of guarantee from partners or directors
Licences, if any
Annual accounting report
Details of any ongoing debt (such as previous loans)
Eligibility criteria
Those applying for an SME loan have to meet the following eligibility criteria:
They must be between the ages of 25 and 55
They must have at least three years of work experience
They have to provide a reason for the loan, such as inventory purchase, marketing, hiring new staff, etc.
Process of application
The process of applying for a Business Loan can differ from lender to lender. However, most lenders offer an online process as well as the option to visit a bank branch and apply for the loan in person. You can select either based on your convenience and preference.
Collateral
An important thing to note about Business Loan for SME is that most lenders do not require collateral. Since these businesses are relatively new with minimal assets to their name, Business Loan for SME can be available without collateral. The loan amount is also smaller, so lenders do not demand any security to cover the risk.
However, some Business Loan for SME may be secured loans, where collateral can be mandatory. It is advised to check the eligibility and discuss this with the lender beforehand.
Loan tenure
The loan tenure is generally shorter compared to high value corporate loans.
Loans for large businesses and corporates
Large businesses and corporates are well-established companies that have been around for some years. The financial requirements of these businesses are comparatively higher. This is why Business Loan for large businesses and corporates is usually of higher value than compared to the SME industry. Business Loan can be used for business expansion, renting new offices, hiring more employees, enhanced production, etc.
Documents required
Large businesses and corporates need the following documents to apply for a Business Loan:
The previous year's business IT returns
Sales tax returns
Sales tax certificate
Bank account details of the company
Bank statement for the past six months
Profit and loss account
Balance sheet for the past two years
A copy of the Memorandum of Association (MOA)
A copy of the Articles of Association (AOA)
Establishment certificate
Trade licence
Eligibility criteria
Those applying for a corporate loan have to meet the following eligibility criteria:
They should be aged between 21 and 65
The company should have a minimum turnover of ₹40 lakh
They must have at least three years of work experience with the current business and five years in total
The company should have a minimal annual IT return of ₹1.5 lakh per annum
Applicants should have at least the previous two year's ITR
The company should have been making a profit for at least the last two years
Process of application
Large enterprises and corporates can apply for a corporate business loan online or visit the nearest bank branch.
Collateral
Since the value of the loan is comparatively higher, the lender will likely ask for collateral. This could be any financial asset like an investment, term insurance, real estate, etc. In the case of a loan default, the lender has the legal authority to take over the financial asset and recover the unpaid funds.
Loan tenure
The loan tenure is generally longer than SME loans since the value of the debt is very high.
For both SMEs and corporates seeking a loan, the process and requirements for seeking a loan can be slightly different, but it does offer enterprises a flexible financing option. The choice can be made keeping in mind the eligibility and purpose of the business.
You can avail of a Business Loan with HDFC Bank for up to ₹40 lakh without any collateral or guarantor. You can also get your existing loan transferred to HDFC Bank at lower EMIs and attractive interest rates.
Looking for A Complete Guide on Business Loans for MSME and Start-Up Business? Click here.
To learn more about the various products and services at HDFC Bank that can benefit your enterprise, you can check out the MyBusiness page
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. HDFC Bank recognises the challenges entrepreneurs face while acquiring capital. Thus, HDFC Bank has created MyBusiness, a one-stop solution that gives you easy access to loans, digital solutions and provides you with the essential knowledge you need to run your business. With HDFC Bank MyBusiness, you can scale up, expand your operations, and nurture your business.
