Whether you want to expand your business or start a new business, you may need financial help from outside. Without external funding, you may stay behind to take the advantages of the market opportunities. At many stages of a business cycle, a businessman needs a business loan to fund working capital or operational expenses. That is why many lenders are offering business loans to startups or small and medium enterprises (SMEs). A business loan ensures that your business doesn’t face any financial problems.
What is a small business loan?
A small business loan is a financial tool exclusively meant for self-employed individuals as wells as enterprises such as proprietorship, private and public limited entities. It can be used to invest in infrastructure, buy new machinery, to increase working capital, set up a new branch etc.
Leading small business loan lenders in India
State Bank of India Simplified Small Business Loan
State Bank of India offers the Simplified Small Business Loan units engaged in manufacturing and services activities, as well as self-employed individuals, professionals, and wholesale / retail traders. SBI Simplified Small Business Loan can be availed for build-up of current assets and fixed assets of the business.
Some notable features of SBI Small Business Loan are as under:
| Loan amount | 10 times of average monthly balance in current account in last 12 months.
Min: Rs. 10 lakhs Max: Less than Rs. 25 lakhs |
| Interest rate | 8.25% to 16.95% |
| Collateral security | Minimum collateral of 40% |
| Loan tenure | Up to 60 months |
| Margin (%) | 10% |
HDFC Bank Business Loan
HDFC Bank offers business loans to all your diverse business requirements. HDFC Bank business loans are tailormade to cater to unique needs of your business irrespective business’s size small or large. HDFC business loan comes with a host of benefits like:
- You can transfer your existing business loan with another lender to HDFC Bank
- Dropline overdraft facility up to Rs. 5 lakh to 15 lakh
- No security/ guarantor needed
- No foreclosure charges
- Flexible tenure
- Attractive rate of interest
Some notable features of HDFC business loan are as under
| Loan amount | Up to Rs. 40 lakhs; up to Rs. 50 lakhs in select locations |
| Interest rate | 15.65% to 21.20% |
| Processing fees | Up to 2.50% of the loan amount (minimum of Rs. 2359/- & maximum Rs. 88500/-) |
| Loan tenure | Up to 48 months |
| Overdue EMI interest | 2% per month subject to a minimum of Rs. 200/- |
Tata Capital Business Loan
Tata Capital offers unsecured business loans to meet your various business needs. You can avail a Tata Capital business loan to open a new branch, buy new machinery, increase working capital etc.
Some exciting features of Tata Capital business loan
- Business loan can be customized as per your business requirements
- High eligibility
- Fully unsecured business loan
- Structured EMI option
Key features of Tata Capital Business loan
| Loan amount | Rs. 5,00,000 to Rs. 50,00,000 |
| Interest rate | Starting from 19% |
| Processing fees | Up to 2.75% of the loan amount + GST |
| Loan tenure | 12 to 36 months |
| Penal interest | 3% on overdue amount per month + GST |
Bank of Baroda Business Loan
Bank of Baroda business loan offers for diverse needs of your business such as for the purchase of equipment, general working capital. Bank of Baroda business loan is designed for individuals operating independently without hiring labour.
Exciting features of Bank of Baroda business loan
- Simple application procedure
- Multipurpose loan: for acquisition and repair of business premise or tools
- Loan is available at every branch of the bank
- Accounts rated A+ will get loan at lower interest rate
Key features of Bank of Baroda business loan
| Loan amount | 4.5 times the borrower’s tangible net worth |
| Interest rate | Linked to tenor based MCRL |
| Processing fees | Up to 0.75% of the loan amount |
Magma Fincorp SME Loan
Magma Fincorp offers SME loans starting from Rs. 3 lakhs to 2 crore for various business needs. Magma SME loan comes in forms – Collateral free SME loan, loans for self-employed doctors and express business loan.
Notable features of Magma Fincorp SME loan
- Loan can be customized as per borrowers needs
- Easy documentation and fast processing
- No primary security or collateral requirement
Key features of Magma SME loan
| Loan amount | 3 lakhs to 2 crore |
| Tenure | From 12 to 48 months |
ICICI Bank SME business loan
ICICI Bank offers SME business loans for your various working capital needs against your property and debt mutual funds.
Notable features of ICICI Bank SME business loan
- Attractive interest rate
- Pay interest only on the amount used
- Loan for various working capital needs
Key features of ICICI Bank SME business loan
| Loan amount | Up to 2 crore |
| Interest rate | Depends on loan type |
| Processing fees | Up to 2% of loan facility + applicable tax |
| Loan term | Up to 7 years |
Eligibility for small business loan
- Self-employed individuals as wells as enterprises such as partnership firms, private and public limited entities, proprietors engaged in manufacturing, services, wholesalers, and retailors etc.
- Borrowers should be at least 21-year old at the time of application and less than 65-year old at the time of loan maturity
- Minimum turnover Rs. 40 lakhs p.a.
- Minimum income Rs. 1.5 lakh p.a. while making profit for the last two years
Documents required for small business loans
- Fully filled and duly signed application
- Passport-size photographs of business owner or partners
- Business entity proof, partnership deed, Article of Association (AOA), shop establishment certificate
- Proprietor’s/ partner’s / director’s promoter’s PAN card
- Address of the business entity
- Bank statement for the last 6 months
- Financials:
- Projected turnover and current year performance of business entity
- Audited and provisional reports last 3 years (balance sheet, profit and loss account, VAT returns, tax audit report)
- Last 1 year ITR (income tax return) of the borrowing entity
Common business loans in India
Government loan: Government of India has launched special loan schemes, like Mudra Yojana, for small business units across the country.
Project finance: Offered on the basis of project assessment report for long-term infrastructure or industrial projects.
Equipment finance: Extended to buy or lease equipment for business units.
Working capital finance: Provided for daily working needs to ensure business operates smoothly
Financial advisory: Provided to seek financial advisory from financial experts.
Insurance: Provided for insurance solution for better safety.
Trade loans: Provided for traders to expand existing business or start new business.
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