How to get a Business Loan?
One of the many constraints that small and large businesses face while expanding a business is the lack of funds. There’s only so much a company can grow with limited funds.
As a company grows, a businessperson will need increasingly more significant amounts of funds. He or she will need funds for larger premises, to invest in modern machinery, to pay the salaries of a larger number and more skilled staff, for increased marketing efforts and so on.
There are several funding options available for businesspeople. One is relying on his or her funds, another is taking Business Loans from banks, and the third is raising funds through an initial public offer (IPO) from the investing public.
So let’s look at all these choices. Relying on your funds could be the best option since you don’t have to pay interest on loans or worry about repaying anyone. But not everyone has access to these kinds of funds; many people in business are not born rich! Coming out with an IPO is another choice. But a company needs some critical mass to come out with an IPO. You will need a minimum paid-up capital of Rs 10 crore, and market capitalisation after the IPO shouldn’t be less than Rs 25 crore. That can be a steep ask for most small businesspeople!
So of all the options, it is clear that a Business Loan from a bank is the best option for most people in the business. In the past, you had to jump through hoops to get a Business Loan from a bank. But that’s a thing of the past now.
In the past few years, banks have made these loans much more accessible to established business owners. Loans are disbursed quickly, interest rates are reasonable, the documentation is minimal, and payments can be made in easy instalments. Let’s see how to get a Business Loan.
How to Apply for a Business Loan?
- Check interest rates: When you are scouting around for a Business Loan, you must find a bank that offers you the best terms to ensure that interest payments are kept to a minimum. Interest rates vary according to banks’ perceptions of your creditworthiness and other factors, so there could be significant differences in rates charged by different banks. There are web sites that give you some idea of interest rates charged by different banks that you can use as a reference. But you have to remember that the ultimate rate you pay will depend on the factors that we have mentioned above.
- Is your bank right for you? When you wonder how to get a loan for your business, you might want to consider the bank with which you already have an account. The process is so much easier, because the bank already has all your details with it, and information on your credit history as well. You could well get lower interest rates, and the disbursal could be much faster. For example, HDFC Bank disburses loans in a few seconds for certain preferred customers. So there’s a clear advantage in taking a Business Loan from your bank!
- Online application: Wondered how to apply for Business Loan online? Many banks do offer this kind of facility, allowing you to first check your eligibility for a Business Loan online. If you are eligible, you can proceed to apply for the Business Loan online. You have to give details like your name, address, the industry you are in, annual net profit, how many years you have been doing business, and so on.
- Choosing the right tenure: Choosing the right tenure is essential since you will pay more in interest if you take loans for a longer tenure. You’ll need Business Loansof a shorter tenure for your working capital needs. If you are interested in expansion, the loans will have to be of a longer tenure. Find a bank that offers tenures that suit your requirements.
- Documentation: How to apply for a Small Business Loan with minimal documentation? If you are an account holder in the bank, the documentation will be minimal. Otherwise, you may have to provide proof of income like income tax returns, bank statements and balance sheets, and ID and address proofs like Aadhaar card, PAN card, passport etc.
Don’t let lack of funds put up barriers that will come in the way of the smooth functioning and growth of your business. After all, we trust you to scale new heights! It’s easy to apply for a Business Loan and make your business vision come true now!
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* Terms & conditions apply. Business Loan disbursal at the sole discretion of HDFC Bank Ltd. * 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.