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Business Loan for small businesses in India.

Is it possible to get a Business Loan (Unsecured Business Loan) for small businesses in Bangalore? The answer is very much YES!!! Read on to know more as to how do you qualify for a small business loan in Bangalore.

First, let’s make a hypothesis as to what constitutes a small business. There are varied explanations to this based on Turnover, Investment in Plant & Machinery, how the government defines the small business, and so on. For the sake of convenience & easier understanding lets presume a small business as a business with less than 1,00,00,000 of turnover annually. For further convenience let’s assume turnover of 1,00,00,000 & above as per the I.T.R filed by the business.

For businesses with a turnover of less than 1 Crore, the loan product is usually called a Personal Loan rather than a Business loan. There are few banks & N.B.F.C’s which lends to small businesses in Bangalore. Let’s look at some of the qualifying criteria.

  1. Minimum business Vintage of 3 years, some lenders insist on 5 years of business vintage
  2. Decent banking habits with no cheque bounces & healthy bank balances regularly.
  3. Business needs to be registered and possess a G.S.T Certificate
  4. Monthly G.S.T returns (VAT returns still July 2017) should be available.
  5. 2 Years of I.T.R should be available. This has to be the complete set of documents that include statement of income, Balance Sheet, P & L statement, schedules
  6. Most banks will insist on any existing loan track record which means C.I.B.I.L score should not 0 or -1

Once you qualify to most of the above criteria, you can approach any of the banks for a small business loan or personal loan. This could sometimes be a tedious since each bank or N.B.F.C will have either own policies/products while lending. Getting the right bank to fund you can often be a herculean task. Hence approaching certain good online platforms or agencies is a good idea since they will do all the research works on your behalf free of cost! Your probability of getting a loan increases manifold. An added advantage is that most of the agencies will provide a doorstep service saving much of your precious time!

How much can you borrow as a small business loan?

This calculation is totally dependent on the financials & is done similar to a normal business loan. However, most of the banks will cap the loan amount to less than 15,00,000.

Rate of interest on a small business loan or a personal loan will be usually on the higher side since lenders perceive this as a slightly riskier portfolio. The rate of interest starts from 18-20% and can go up to 32% annually on a reducing basis. The rest of the charges remain the same with no much scope of bargaining. Processing fees & Insurance will be on the higher side.

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