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FREQUENTLY ASKED QUESTIONS

What is a business loan?

A business loan is a type of financial assistance provided by banks and financial institutions to help businesses fund operations, expand, or meet working capital needs.

Who can apply for a business loan in India?

Business loans can be applied for by self-employed individuals, proprietors, partnership firms, private limited companies, and public limited companies.

What are the different types of business loans available?

Common types of business loans include working capital loans, term loans, equipment financing, overdraft facilities, and loans for business expansion.

What are the eligibility criteria for a business loan?

Eligibility criteria may vary by lender, but generally include business age (minimum 2-3 years), turnover requirements, credit score, and proof of profitability.

What documents are required to apply for a business loan?

The basic documents include identity and address proof, financial statements, business registration proof, bank statements, and income tax returns. Additional documents may be required depending on the loan type and amount.

What is the interest rate on a business loan?

Interest rates typically range from 8% to 24%, depending on the lender, loan type, loan amount, tenure, and the borrower’s creditworthiness.

Is collateral required for a business loan?

Some business loans are secured and require collateral, such as property or equipment, while others are unsecured and do not require collateral.

How long does it take to get a business loan approved?

Approval times can range from a few days to a couple of weeks, depending on the lender’s processing time and the documentation submitted.

Can a new business apply for a loan?

Yes, certain financial institutions offer startup loans or business loans to new businesses. However, these loans may require a solid business plan and personal guarantees.

What is the maximum loan amount I can get?

The loan amount depends on various factors like business turnover, profitability, lender policies, and credit history. Business loans can range from ₹50,000 to ₹5 crore or more.

What is the tenure of a business loan?

Business loan tenures typically range from 12 months to 5 years, depending on the type of loan and the lender’s policies.

Can I prepay my business loan?

Yes, most lenders allow prepayment, but some may charge a prepayment penalty. It’s essential to check with the lender for specific terms.

How can I use a business loan?

A business loan can be used for various purposes, such as working capital, buying equipment, expanding operations, purchasing inventory, or any business-related expenses.

Can I get a business loan without a good credit score?

A good credit score improves the chances of loan approval and better interest rates. However, certain lenders may provide loans to businesses with lower credit scores, albeit at higher interest rates or with collateral.

What is the difference between a secured and an unsecured business loan?

A secured loan requires collateral (e.g., property, machinery), while an unsecured loan does not require any asset as security but may have higher interest rates and stricter eligibility criteria.
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