All About Business Loans - Business Loan Blog - Tata Capital

A to Z of Business Loans in India

Mar 07, 2017

The commercial loan market in India is rapidly evolving. There are many lending institutions that provide capital for start-ups. Additionally, lenders also offer finance to fund working capital needs as well as for growth and expansion activities.

The Government of India has provided many business loan schemes and programs to encourage entrepreneurs to start new ventures. The Central and State government have undertaken numerous initiatives to uplift the small businesses across the country. Ultimately, the growth of businesses contributes to the development of the nation's economy.

Types of loans available in the country

There are various types of commercial loans namely working capital loans, corporate term loans, and term finance. Working capital loans are provided to fund the daily operations of a business. Corporate term loans, on the other hand, are used to fund startups and for growth and expansion purposes. Term loans are provided to businesses for acquiring assets like land, plant and machinery besides others. It is imperative to make a right choice between the numerous types of loans based on the business requirements.

Different loan schemes available in India

Besides business loans that are offered by private lending institutions, the Government of India also provides loan schemes. Various schemes are offered through public sector banks to provide financial assistance to small and medium enterprises (SMEs). Some of the top fund schemes for SMEs are Credit Guarantee Fund Scheme for Micro and Small Enterprises, Credit Link Capital Subsidy Scheme for Technology Upgradation, Market Development Assistance Scheme for MSMEs, Technology and Quality Upgradation Support to Micro, Small and Medium Enterprises, and Mini Tool Room and Training Centre Scheme. The main objective of these schemes is to boost India¿s economy and place additional emphasis on business development.

Eligibility and documentation

Though various lenders have their own eligibility criteria, the basic criteria remain the same. The applicant must be the owner of the business, and should be minimum 21 years of age while applying for the loan, and maximum 65 years at the end of the tenure. Businesses should also be profitable and should have a trading history. It is necessary to submit supporting documents like Income Tax Returns, Memorandum of Association, Articles of Association, bank statements, Profit and Loss account statements, Balance sheet statements, as well as basic Know-Your-Customer (KYC) documents while applying for the business loan.

There are many options available for those wishing to obtain business loans in India. Private finance, peer-to-peer borrowing, banks, and non-banking lending institutions are some of the sources. Upcoming entrepreneurs may avail of these sources of funds based on their business requirements.