Business Loan: Overview
A business loan is a type of financing offered to entrepreneurs, business owners, or companies to meet various business needs such as working capital, expansion, purchasing equipment, inventory, or hiring staff. It can be secured (with collateral) or unsecured (without collateral).
Advantages of a Business Loan
-
Maintains Business Ownership
Unlike equity funding, you don’t give away any ownership or control in your company. -
Flexible Usage
The funds can be used for various business purposes like expansion, inventory, or cash flow management. -
Quick Disbursal
Many financial institutions offer fast approval and disbursal, especially for pre-approved customers. -
Competitive Interest Rates
Business loans often come with reasonable interest rates depending on the borrower’s creditworthiness. -
Builds Creditworthiness
Timely repayment of loans helps build a good business credit score for future financing. -
No Collateral Option
Unsecured business loans are available without needing to pledge business or personal assets.
Eligibility Criteria for a Business Loan
(Note: May vary slightly between lenders)
-
Age of Applicant
Usually between 21 to 65 years at the time of loan maturity
-
Business Type
Sole proprietorship, partnership, private limited company, or LLP
-
Business Vintage
Business should be operational for at least 1–3 years
-
Turnover and Profitability
Minimum annual turnover requirement (e.g., ₹10 lakh to ₹50 lakh or more)
Proof of consistent profit in recent year
-
Credit Score
A CIBIL score of 700+ is generally preferred for unsecured loans