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Tata Capital > Blog > Loan for Business > Step by Step Business Loan Application Process Explained

Loan for Business

Step by Step Business Loan Application Process Explained

Step by Step Business Loan Application Process Explained

No company ever set down with a Midas touch! Not even Google, which started as ‘Backrub’ in a small dorm room at Stanford University. Money has always been at the core of any business. Especially now, when the economic downturn has sent many into financial despair, the need for business credit has become more pronounced. 

A business loan has quickly become the most efficient way for a company to keep afloat and expand. From investment in infrastructure to new product launches and cash flow management, you can avail business credit to scale your business rapidly. If you know how to get a business loan, you do not have to pay for your business-related expenses out of your pocket. Instead, you use the loan amount to fund those expenses. And you can then repay the loan amount in instalments out of profit. 

Any business entity, both professional and non-professional (self-employed), can obtain business credit with relative ease. And unlike traditional finance, lenders today have made business credit more widely available, especially to small-scale enterprises. So, if you are also in need of a business loan, read further to learn how to apply for a business loan step by step.

Business credit today

Back in the day, business finance was synonymous with a tedious application process, strict credit evaluation, and exhaustive documentation. But fortunately, business loan application steps have become much more straightforward. Not to mention, the rules around business credit have become much more relaxed over the years.

Today, lenders offer useful tools like business loan EMI calculator to help borrowers better estimate the costs involved. Most of the application procedure now happens online at the convenience of the borrower. Especially in the wake of COVID-19, many lenders have invested in technology to transform operations for improved efficiency – from interactive consumer apps to online facility for document verification.

In addition to the rapid digitalisation, the relief measures from both the Indian government and RBI have effectively nursed the liquidity crisis in the financial sector. Most notably, RBI’s decision to cut down the policy repo rate by 75 basis points allowed borrowers to avail business credit at reduced business loan interest rate.

Coupled with the subordinated debt and unsecured loans facility for many stressed MSMEs, the relief measures helped alleviate the liquidity crisis further. Nonetheless, under the current economic circumstances, if your company needs immediate funds to build financial resilience against COVID-19, business credit may prove particularly useful.

Let us now see how to apply for a business loan in just 5 simple steps:

#1 Understand the Different Types of Business Loans

People often associate business credit with strict eligibility criteria, accompanied by long waiting periods. In truth, business credit is relatively easy to obtain today, with a variety of options to choose from. You can select a suitable type of loan based on business necessity, from business expansion to equipment finance.

Standard business loans include:

MSME & SME loan –

MSME and SME loan is a type of business loan specially designed to fund operations of any micro, small, or medium-sized enterprises.

Working Capital loan –

Working capital loan is a type of business loan taken to finance everyday operations in a company, especially when the liquidity is inadequate. You can use a working capital loan to settle expenses like payroll, rent, operational costs, or inject cash into your business during off-seasons. 

Machinery loan –

Machinery loans help enterprises obtain funds for investing specifically in new equipment or machinery to improve their production process and enhance productivity.

• Invoice financing –

Invoice financing is useful if there is a significant time gap between making a sale and receiving its payment. Most lenders will easily finance around 80% of the amount receivable and take a percentage of the invoice amount as a fee. 

• Start-up loan –

As the name suggests, a start-up loan is specifically for new business ventures. It provides an influx of cash to start-ups during their initial years so they can easily meet their financial obligations. 

Once you have narrowed down the type of business loan, apply with a lender of choice. Nowadays, you can apply online or offline, based on convenience. But before you do, make sure you understand the eligibility conditions to a T.

Generally, application forms for business finance comprise of two sections – business details and personal details. Make sure to fill the data fields with the correct information for a smooth process.

Additional Read: A guide on how to fill your business loan Application form in 2020

#2 Prepare essential documents

Know why sometimes sanctioning of business finance faces delays? Mostly due to a lack of appropriate preparation and improper documentation. On the contrary, when you prepare the essential documents in advance, you can furnish them on time and speed up the process naturally.

Additional Read: How to speed up Business loan Document verification process

Besides, the verification process has become much more relaxed today. Many lenders now provide online verification facilities, which you can access easily, from anywhere. You only need to upload the required documents in a specific format. Once verified, lenders usually contact you to inform you about the application status.

However, since documentation typically varies for different lenders and loan types, you should always consult the lending institution to prepare well. In any case, a lender may ask you to furnish documents such as:

  • Correctly filled application form
  • A detailed business plan which lucidly describes your firm’s purpose and objectives, past performance reports, and how you wish to use the loan amount.
  • Up to the last six months of company bank statements
  • KYC documents of the company (PAN card, Ownership papers)
  • KYC documents of the business owner (CIBIL score, PAN number)
  • Income tax returns for the last two years
  • Audited balance sheet for the previous two years

As you may know, of the various business loan application steps, document verification is one of the most crucial ones. Make sure the documents are duly attested and audited as required. Any improper paperwork will eventually lead to delays.

Additional Read: List of documents you must have to get your business loan approved in 2020

#3 Use a business loan calculator

When applying for a loan, analyse your and your business's financial situation to see if you can afford to pay back the loan within the stipulated period. If yes, decide how much loan amount can you borrow without burdening your finances? 

Easiest way to assure approval is to fill out the exact loan amount you can afford to borrow. Many lenders today host online business loan EMI calculator free of cost. Just visit your lender’s website and enter your desired loan amount and tenure. The calculator will provide you with the exact amount of EMIs you will need to pay, depending on the interest rates. 

It is also important to note that your monthly income should ideally balance the sum because lenders typically evaluate creditworthiness based on income.

#4 Key Factors in the Business Loan Approval Process

Of the many business loan application steps, loan approval typically takes the longest. While there are ways to speed up the approval process, most usually come to no avail. This is because, irrespective of how well you prepare the necessary paperwork, loan approval is always done on an individual basis. As a result, what may work for one borrower may not work for you?

Nonetheless, you can quickly turn the tides in your favour if you practice caution for factors such as:

Type of loan –

If you only need the loan to finance inventory purchase, applying for a working capital loan does not make sense. Make sure you choose a loan type to fit your business needs to avoid bad debt. Besides, with the right kind of loan, you can also secure a competitive business loan interest rate.

Business plan –

Be transparent about the financial health of your business without omissions or additions. Provide complete details, including previous years’ performance reports, current financial position, and future plans. Also, detail out how you will use the borrowed funds to earn the trust of the lender. You can use a business loan EMI calculator to make financial projections. A comprehensive business plan backed by suitable credit history will enhance your credibility and consequently, chances of approval.

Credit score –

Your credit score validates your creditworthiness. Make sure you have a score above 700 for assured loan approval, especially since most lenders will evaluate your business loan eligibility based on it. If not, try to raise the score before you apply.

In addition to the factors mentioned above, you should expect a personal discussion with a loan officer/underwriter. Lending institutions usually hold talks with the borrower to understand the various objectives related to the loan.

They may ask you about your educational qualification, previous debts, income sources, and more. To ensure the discussion ends on a positive note, maintain transparency in your answers. Talk about your financial state clearly, and with confidence.

Additional Read: Top things to consider in order get your business loan approved in 1 go

#5 6 Steps to Ensure your Loan Gets Approved Quickly

On average, the process from loan application to disbursal typically takes about 3-4 days and primarily rides on how satisfactorily you filled the application form. If lenders encounter any incorrect information or missed data field, they may delay or reject the loan in some cases. Because a loan application form collects relevant information about the borrower, you must apply carefully. Or else, you may have to repeat the business finance application steps from the start.

Likewise, in the loan application form, only mention a loan amount you can repay quickly. A business loan calculator will come handy to make such estimates. You can also approximate the EMIs and plan your finances similarly. Remember, lenders usually favour borrowers who have a business plan in place. Therefore, exact loan quotation may lead to faster loan approval and subsequently, disbursal.

Moreover, you can use the following tips to speed up the disbursal process seamlessly:

  • Research the market for a suitable lender before you commit.
  • Make sure you follow all the business credit application steps to the T.
  • Facilitate open communication with the lender to understand major red flags.
  • Keep your financial record updated, especially in case of previous debts.
  • Pay off any outstanding debts to increase your capacity to borrow.
  • For a swift business loan, apply online as paperless loan disbursals are typically faster.

Additional Read: How to Speed up your Business loan Disbursal process

How to Apply for a Business Loan?

Applying for a business loan is a simple, 5-step process online. Here's how you can apply-

1. Visit the website for online application

Visit your preferred lender's website and access the business loan application form. Fill out the form with the required details.

2. Upload the necessary documents

Upload the required documents such as KYC, proof of income, business documents, etc.

3. Wait for verification

Once the application and documents are submitted, the lender will verify all the documents.

4. Loan approval

Upon successful verification, the lender will approve your loan.

5. Disbursal

Your bank will disburse the loan amount to your account within a few days.

To sum up

From business expansion to cash flow management, business finance offers a highly effective way for enterprises to raise the necessary capital and scale up swiftly. Not only can a business enjoy lucrative financial leverage, but avail a host of other monetary benefits.

Key benefits of availing business finance are:

  • Instant access to necessary funds, usually without collateral.
  • A relatively easy and quick application process.
  • Easy EMI estimation with tools like a business loan calculatorGST calculator, etc.
  • Maintain ample liquidity in the system in case of temporary shortfalls.
  • Build a strong credit profile with timely repayments.
  • Finance various business operations, from new equipment to payroll.

Aside from the benefits summarised above, business credit provides tax benefits as well. Did you know the interest outgo on business finance is tax-deductible? Write off the interest you pay on your loan as business expenditure to avail of tax deductions and cut down the total tax amount favourably.

Ready to apply?

Now that you know how to get a business loan, turn to Tata Capital if you want a business loan. At Tata Capital, we offer competitive terms on business loans. Apply for a lucrative loan exclusively crafted to meet your business requirements, from inventory purchase to expansion.

Not sure of our turnaround time? Well, it’s quicker than most. Once you have shared required documents with us, we typically take hours to approve the loan online.

For complete business loan eligibility details, log on to our website or give us a call today!


1. Who is eligible for a small business loan?

Any business person between the ages of 21 at the time of application and 65 years at the time of last EMI can apply for a business loan. Additionally, they must have a profitable business with 2 years of business stability and a credit score of at least 650.

2. What is the maximum tenure of a business loan?

The repayment tenure for a business loan can differ from one lender to another. Lenders typically offer a maximum tenure of 5 years or more when applying for a business loan.

3. How long does it take to approve a business loan? The time it takes to approve a business loan can vary depending on several factors, such as the lender's internal processes, verification process, or if additional documents are required from the borrower. Generally, the approval process for a business loan can take anywhere from a few days to a few weeks.

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