Whether you are a new generation entrepreneur venturing into a new business or an established businessman planning for a business expansion. Banks offer loan for both the purposes. Whether its money required for an immediate official extension or it could be the time of recession, when payments don't come on time but the expenditures can't wait. The business loans ease your way through a scary road of financial crisis and open the world of new business heights for you.
A business loan is funding given to business by a bank, an individual(s), or an organization usually to be repaid by a certain date with a certain amount of interest. The amount of a loan, the amount of interest, the repayment date, the qualification of the loan recipient to merit the loan, the credit analysis, and the number of lenders used to achieve the desired loan amount are all variable Business Loans are offered in two types, Secured and unsecured.
Secured business loan, means that the entrepreneur keeps something as collateral or security against the loan amount taken. Be it raw material or finished products, land or machinery, anything can be kept as collateral in agreement with the lending party. The borrower can also offer cash advance as collateral as it offers more liquidity and the loan can be availed at lower interest rates and flexible repayment options.
Unsecured Business Loan, as the name explains is a type of loan that doesn't require collateral. In case of unsecured business loans, here is no requirement of any collateral from the borrower. However, while availing an unsecured business loan, the borrower needs to pay a high interest rate. Moreover, the loan amount is taken for a smaller tenure when compared to a secured loan.
Eligibility for business loans:
As with other types of loans each lender will have specific criteria or eligibility requirements that must be met in order to get a business loan.
Your personal details, such as how long you have been in business and your credit history, will be taken into account, along with other factors such as the income or projected income of your business, any assets, and more.
Documentation for availing business loans
To processing your business loan application bankers need some genuine documents that help the bankers to establish all claims stated by you. Almost all the banks required similar type of documents:
- Identity (PAN Card/Passport/Voter's Card)
- Age Proof
- Proof of Signature (PAN Card/Passport/Banker's verification of signature)
- Resident Address Proof
- Income proof of all the applicants
- Bank statements personal and current account) of last 6 months.
- Constitution of the business(Memorandum of Association/ Articles of Association/ Certificate of Incorporation/Partnership deed/ Shop act /SSI)
- Proof of Continuity Current Profession/Business (IT Returns / Certificate of business continuity issued by the bank).
- Security Documents All you have to do is to provide supporting documents so that the loan process can start moving forward.
Procedure of Project Financing for business loans
Project financing refers to a financing in which lenders to a project look primarily to the cash flow and assets of that project as the source of payment of their loans.
- A primary meeting is conducted with the client to know about the requirements of finance, purpose of loan, background of the promoter and firm, future plans.
- Analysis of existing loans i.e. Term Loans, Cash Credit, and Bank Guarantee & Letter of Credit.
- Sanction letter and Account statements of existing bank facilities are analyzed for account running status, rate of interest and due payments.
- Analysis of Collateral security given for the same i.e. FDR, LIC Assignment, NA Land, Residential or Commercial property.
- A Detailed Meeting is undertaken with the client to know more about the Industry and company profile ,Product profile, process of manufacturing the products Credit policies , financial details etc and a theoretical report for the same is prepared for the client.
- Forwarding the project report along with documents to the bank.
- Projections are made to analyses the future earnings of the company.
- Banks then scrutinizes the documents and allots the time for bank site visit for the client plant.
- We provide assistance to client at the time of bank site visit also helps at the time of submission of search & Valuation Report, the search report is prepared by lawyer signifying title clearance over a Security proposed and valuation report is prepared by the Government Valuers for calculating the realized and the distress value for the security proposed.
- Completion of Borrower’s declaration Form and guarantor’s declaration form.
- Filling of Bank’s CMA Format & Appraisal note.
- Then the beginning of Bank Sanction & Appraisal Process of the bank
- The sanction letter is then sent to the client.
- When the bank starts its mortgage process all the applications and documents are sent by the bank for the purpose of franking.
- Signature and stamping are done by the bank and the client.
- Then finally the Loan Approval Letter is given by the bank to the client followed by the loan disbursement.
