Business loans are provided by various banks mainly to Self-Employed business man in order to fulfill their short or long term financial goals , which can be immediately fulfilled by taking an unsecured loan (Not Backed by any assets) from any Bank or financial institutions .
The need of this type of Loan normally arises due to working capital ( Which can be defined as the difference between current assets(Cash/Debtors/Stock etc) and current liabilities (Sundry Creditors etc..) requirements of any company, many a time business capital gets stretched due to some unforeseen business events such as..immediate rise in expense due to some big orders , business man might want to acquire some new products /technology to kill its competition, etc, hence, in order to manage these kind of exigencies that have an direct impact on cash flows he looks for some capital that can help him manage the overall cash cycle of his enterprise in an efficient manner .
Why should I take a business loan?
One should take a business Loan in case of exigencies only as these loans attract high interest rates which might start from 14% to 19% p.a. depending upon the overall business profile of the customer , however it is always advisable that one should go for such kind of loans for short term goals only which have certain time limitations such as :
- Immediate rise in expense due to some big orders which need to be timely delivered and has good revenue margins .
- You might want to acquire some new products /technology in the market in order to kill your competition .
- To avail some big discounts on any products/ services that might expire in due course of time .
- To do the capital infusion in the company for short term .
These Loans are very high in demand due to its following nature :
- Its unsecured in nature that means no collateral is required which is not the
case in other types of business loans such as CC(cash credit)/OD(overdraft) limits.
- The time taken by any bank/FI’s to disburse these kind of loans is very fast that means it does not take more than 15 to 20 days for any banks/FI’s to give a loan credit to the respective company ,provided the company profile fits into the bank’s/FI’s risk parameters(Financially or non-financial) and also these parameters may differ from bank to bank .
- Also end use of these funds are not defined /measured as in the case of CC/OD limits, where periodic audit is compulsory by any bank due to the mandate from RBI .
What are eligibility criteria for availing of a business loan?
Business loans facility is provided to normally all types of enterprises that exists in our ecosystem such as sole proprietorships, partnerships and private limited companies. Normally all the banks’s /FI’s takes multiple factors into account for arriving at an eligibility of an any individual/company, these factors can be basis your company’s turnover/net profits/depreciation/Director’s & partner’s salary/Business vintage/Type of business /CIBIL records/Banks statement analysis etc .
Various banks/FI’s have evolved their own techniques /formulas for arriving at an loan eligibility ,this is quite complex , but we at bookmybank.com have been able to collate these multiple algorithms of major 15 FI’s/banks in order to make your lives simple ,just by clicking few buttons and sharing with some of your business information you can not only get your company’s eligibility at 75% accuracy which currently no other application in the industry is able to do so.
My Business Loan interest rate would be of what nature , would it be fixed or reducing ?
These type of business loans which are unsecured in nature their rate of interest is usually of reducing in nature or commonly known as floating in banking terms ,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. This is also called reducing because the interest part reduces every month ,normally the rates charged is on the basis of the concerned bank’s/FI’s cost of funds and the prevailing market rates. These rates might change periodically. Accordingly the EMI increases or decreases based on whether the rates move upwards or downwards.