Business loans are basically personal loans availed to meet
expenses related to the operations of a business. Be it for ensuring smooth
functioning of enterprises or raising capital for expansion, business loans are
the best options for entrepreneurs. However, when you make an application for a
business loan, the lender / bank will carry out a check of your documents to
ascertain whether or not you are eligible for credit. The documents that will
require verification include your credit report, your cash flow statements and
other accounts that carry information regarding the gross profit recorded by
your business.
Business loans are usually granted without any need for the
borrower to pledge a collateral security or mortgage. Since business loans are
generally unsecured loans, there is no need for guarantee from group members
either. In essence, business loans are considered as personal loans only for
individual businesses as they are mainly granted to meet small business
expenses. The business / concern’s status does not determine the eligibility of
an individual for a business loan, but what counts is the status of financial
attributes and the tenure and capacity of repayment.
The main aim of a business loan is to facilitate the
development of a business concern. To avail one, you will have to ensure that
there are no risks associated with your enterprise as banks and lenders are
usually sceptical when it comes to lending to individuals who have a rather
high element of risk. It is also important to maintain a complete documentation
of all the loan you have previously availed from other institutions. The manner
in which your personal financial values are managed will determine whether or
not you qualify for a business loan. Even your business plan must be documented
and presented to the lender when required as it plays a crucial role in helping
the bank / lender determine your eligibility for credit.
The best financial institution to approach when seeking a
business loan is the one that previously helped finance your business. The main
reason for returning to your primary lender is that it is already aware of your
past records and reputation with regards to handling credit. The lender will
also possess a summary of your financial accounts, thus making the application
process less tedious for the borrower as your business behavior is already
acknowledged and the bank will be more confident in you so far as repayment is
concerned.
The best banks to approach for
business loans
Entrepreneurs of small businesses have several options when
it comes to availing business loans. Most banks and lenders that have business
loan facilities offer them at similar rates of interest, making it difficult
for individuals to ascertain which bank best suits their requirements.
ICICI Bank offers term loans worth Rs.15 lacs
and does not request any collateral security from the borrower. All that is
expected of the borrower is that he / she submit all the necessary documents
for verification, like their income tax returns for the past three years and
personal ID documents as requested by the lender.
Oriental Bank of Commerce deals with the public sector and
operates in somewhat similar fashion to ICICI Bank but offers loans without any
securities at a slightly lower rate of interest. The Oriental Bank of Commerce
is ideal for entrepreneurs seeking to expand their businesses.
Citibank provides personalized business
loans so that a large number of small businesses can gain access to funds
without providing any past financial records or collateral. Individuals who
borrow from Citibank will not even have to deal with distribution or processing
costs, making it considerably cheaper for the borrower to avail the facility.
HSBC Bank has grown into one of the most
popular banks among Indian borrowers seeking business loans. Having updated its
factoring services and overdraft to help small businesses develop and excel in
its operations, it is no surprise that HSBC is one of the most-preferred
lending institutions in the country.
All of the aforementioned banks offer special schemes to
individuals seeking business loans, making them great options for entrepreneurs
who wish to expand their businesses or meet working capital requirements.
