Have you been planning to set up your own business for a long time now but procrastinating it due to a cash crunch? Or lack of finance is a stumbling block in expanding your existing business? If the answer to these questions is a big “yes,” then it's time you consider opting for a business loan.
Entrepreneurs often require capital either to finance the initial business expenses or fund their day-to-day expenditure of the existing business. Friends, family or others may offer financial help, but that comes with its impediments—you might not get the required amount or may not manage to get regular funding. That’s when business loans offered by banks and non-banking financial institutes help small, medium or large business enterprises keep the ball rolling.
What is a business loan?
A business loan is capital borrowed by an individual or an organisation to fund business needs such as buying land or leasing a factory, purchase new equipment, running daily business affairs or paying salaries to the employees. Banks and non-banking financial institutes cater to the financial needs of these business enterprises depending on their requirements and business potential. Business loans are a secured funding option to help jump-start a new venture, expand and diversify the existing business or meet daily expenses.
Different types of business loans available
Depending on the requirements of a business, financial organisations offer different types of business loans. Some are as follows:
- Start-up loan
It’s for start-ups/new businesses that may not have a unique credit history. The borrower’s credit, the present turnover, etc., are considered while deciding the loan amount, tenure or rate of interest. Proof of the existence of the business and its registration number is mandatory.
- Working capital loan
It falls under the category of small business loans and helps fund an enterprise's everyday operations. Manufacturers, traders, wholesalers, service providers and retailers generally apply for working capital loans.
- Term loan
It’s the most prevalent type of business loan meant to generate capital funding and often paid as a lump sum; it can be secured or unsecured. A secured business loan backs small businesses against personal guarantees or valuable assets put up as collateral. If the borrower fails to repay the loan, the lender can use the mortgaged asset to recover the loss. Collateral-based business loans offer economical interest rates and lengthy tenures. An unsecured business loan, conversely, requires no collateral. Therefore, it’s a faster and easier mode of raising capital. In a term loan, the amount depends on the credit history of the business. The tenure is 15–20 years for a secured business loan and 1–5 years for an unsecured business loan.
- Loan against property for SME
This is a secured business loan for small and medium enterprises. The applicant can avail loan against putting up a litigation-free residential or commercial property as collateral.
- Equipment loan
Also known as a machinery loan, it funds purchasing of equipment for the manufacturing unit of a business and offers an affordable rate of interest. It is very discrete—the equipment for which the fund has been approved is also considered collateral and other assets.
- Invoice financing
When small businesses incur/have to incur expenditure on behalf of their clients, it submits an invoice to the concerned client for reimbursement/funding. However, there’s a time lag between invoice raising and receiving payment from the client. Invoice financing helps these small businesses sail through this time lag by providing up to 80% of the invoice amount.
- Business loans for women
This is meant for small- and medium-sized businesses run by women entrepreneurs.
- Merchant cash advance
The loan amount depends on the portion of everyday debit card sales.
It is a facility where funds are sanctioned against a mortgage—mainly a fixed deposit the borrower has with the lender. A fixed overdraft limit is authorised depending on the borrower’s relationship with the institute, credit history, repayment history, business cash flow, etc.
- Business credit card
It’s ideal for a business owner who needs immediate cash and adds to his credit score simultaneously.
Shriram City is an MSME financier offering competitive customised loans to micro, small and medium enterprises—a one-stop financial solution for MSMEs, hoteliers, proprietors and professionals. It provides working capital loans for running day-to-day business affairs, machinery loans for purchasing equipment and other business loans to maintain company infrastructure and meet other business-related expenses. The customised MSME loans offered by Shriram City are unique. It aligns different loan offerings with your requirements and helps you make a mark on your venture.
Know your eligibility
Different financial institutes have other eligibility criteria. Eligibility criteria that are specific to Shriram City are:
- Individuals between 23 and 65 years of age
- Self-employed individuals/professional/sole proprietorships/partnerships/limited and private limited companies planning to start a business or expand the existing one in possession of GST registration certificate/shop establishment certificate/business PAN card
- In business for at least 3 years
- Declaration of existing credit obligation
- Required credit score: 650+
Why choose Shriram City?
The following features of the MSME loans offered by Shriram City make it a go-to financial institute:
- Low-interest rates: Interest rates start from as low as 15% depending on the profiles of the MSMEs, individuals, professionals, etc.
- Simple SME loan application procedure: The entire process has been digitised to ensure the needful is done from the comfort of your home.
- Minimum documents required: Minimum documents are needed—identity proof, valid address proof, income proof documents, ECS and a security pledge.
- Customised loan: Since the loan solutions are customised per capital needs, your business works as per plan. Shriram City offers loans to MSME segments that cannot get funds from banks or other financial organisations. The loan amount ranges from 1 to 100 lakhs.
- Minimum processing fee: Pay a processing fee as low as 2%. A minimum closure charge of 3%–6% is applicable after 6 months.
- Fast, smooth and secured processing: Upload the required documents on the Shriram City portal for validation. The loan is sanctioned immediately once the document and eligibility authentication is complete.
- Flexible tenure: It ranges from 12 to 60 months. Necessary funds are offered if you are in interim financial trouble.
- Easy repayment: Here, you can pay your loan back in easy instalments.
- Identity proof
- PAN card copy
- Aadhar card copy
- Residential address proof
- Valid driving licence copy
- Valid passport
- Recent gas bill along with the book
- Bank records
- Bank statement of last 6 months’ transaction of a current account
- Business documents (any one of the following would suffice)
- Company or business PAN card
- Shop establishment certificate
- GST certificate
Giving your business a much-needed boost is now just a click away. With Shriram City Union Finance, all you need is to meet the eligibility criteria and choose a loan that best suits your needs. Moreover, calculate the monthly instalments payable with the help of the inbuilt business calculator.