Business Loan FAQs

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Business Loan FAQs

Business loans are provided by various banks to business people for their short or long term financial needs. A lot of times it is important for businessmen to acquire a certain amount of money for running their enterprise. It is well known that without the required capital no business can run. For any business whether in initial stage or in growth phase, capital is required to keep up the momentum. Banks and other financial institutions offer business loans for expanding, modernizing or improving small, medium or large scale businesses.

Why should I take a business loan?

Banks provide loans to business people for their short or long term financial needs. At various stages of running a business, capital is needed either for long term or short term needs. It is well known that without the required capital no business can be run successfully. For any business whether in initial stage or in growth phase, capital is required to keep up the momentum.

What are eligibility criteria for availing of a business loan?

Business loans are provided to all kinds of enterprises like sole proprietorships, partnerships and private limited companies. Though income requirements can vary depending on banks, normally net income of the concern should be more than Rs. 150,000 per annum for business loan up to Rs. 15 lakh and over Rs.3 lakh for business loan above Rs. 15 lakh. A maximum of two incomes of the partners or directors holding a minimum of 25% stake each can be clubbed to the income of the concern.

How can the credit limit be increased?

You can increase the credit limit by giving a request letter and fresh documents to support the enhanced amount facility. This is subject to the eligibility criteria at the time of the new application.

What is a fixed rate loan?

In a fixed rate loan the interest rate on the loan charged by the bank is constant over the tenure of the loan. You should go for a fixed rate only if you feel that the rate of interest prevailing in the market have touched rock bottom and the rates can only move upwards.

What is a floating rate loan?

In a floating rate loan the interest rate charged by the lender keeps changing with respect to the rates in the market over the tenure of the loan. Normally the rate charged is on the basis of their cost of funds and the prevailing market rates. These rates change periodically. Accordingly the tenure increases or decreases or alternatively the EMI increases or decreases based on whether the rates move upwards or downwards.

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