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How to get the best business loan in India? Who offers the best business loans in India?

Updated on March 29, 2016

How to get the best business loan in India? Who offers the best business loans in India?

Business loans can be availed for a variety of purposes such as working capital requirement, equipment purchase, expansion of business units, starting new ventures etc. Banks like State Bank of India, Punjab National Bank, Canara Bank and development financial institutions like ICICI, HDFC, SIDBI etc offer business loans in India. SIDBI is the main financial institution for the promotion, financing and development of MSME (Micro, small and medium) sector in India. IDBI not only provides loans to MSMEs, but also takes care of all their banking needs and services. ICICI offers loans to small business units. Fullerton India offers vyapaar scheme for the self-employed and small business units with a turnover of less than INR 2.5 crore. Loans are provided against stocks and mutual funds, which are considered as capital assets. The National Small Industries Corporation Limited (NSIC) works in conjunction with banks like SBI to provide cheap loans for entrepreneurs. National Bank for Agriculture and Rural Development (NABARD) provides finance for cottage and rural industries

Types of Business Loans: Business loans can be classified into short term loan, intermediate loan and long term loans. Maximum tenure of a short loan is 3 years. Long term loans vary between 10 to 15 years. Similarly, loans can be secured or unsecured. In case of secured loans, the borrower has to provide collateral and the interest rates would be usually lower. Collateral could be property, land, machinery etc

Overdrafts: Overdrafts are very useful for business persons. Overdraft means withdrawing more money than what has been deposited. It is available for current account holders. Interest is charged on the amount withdrawn. Overdraft serves as a useful temporary funding tool for entrepreneurs to meet their financial requirements.

MSME Loans: Apart from the development finance institutions, most public sector and private sector banks offer business loans for MSME (Micro, small and medium enterprises). Private equity and Venture capital funds also flow into the MSME sector.

MUDRA (Micro Units Development and Refinance Agency Ltd): MUDRA is a subsidiary of SIDBI. MUDRA offers loans up to Rs 10 lakh at low interest rates in order to boost small businesses in the country.

How to apply for business loan?

The following things are important while applying for a business loan

****Credit history: Lenders will check your credit report before providing loans. Hence you must ensure that your credit report is up to date. Check your Cibil report in advance and do whatever necessary to better it.

****Business plan: Convince the lender that your business plan is feasible and financially viable, Have all information ready including capital estimates for startups. Banks, Venture funds and Angel investors will check whether your project is financially viable before providing funds.

****Collateral: Business loans are a risk for banks and hence they will seek collateral from the borrower. However, some banks offer loans without collateral for specific purposes. Fullerton India offers loans up to Rs 50 Lakh, without any collateral for self -employed persons involved in manufacturing, trading and the service industry

****Check for eligibility online: You could check your eligibility for business loans with most banks online. Just key in your details and loan requirements and you can check your eligibility instantly

Angel investors: Angel investors are mostly entrepreneurs themselves who invest in startups. They provide financial support as well as handholding for entrepreneurs. If you wish to start your own business, you can approach angel investors. Government has given many concessions for angel investors in order to boost entrepreneurship in the country.

Women entrepreneurs:

SBI offer Stree Shakti Package for women entrepreneurs, under which women could avail interest rate concession of 0.50% on loans exceeding Rs 2 lakh. No security is required for tiny units

Mahila Sashaktikaran Abhiyan scheme of Punjab National Bank offers women entrepreneurs interest concessions of up to 0.50%

Boutique Finance for is a special loan scheme for women entrepreneurs provided by SBI under MUDRA scheme. Loans are provided at concessional interest rate and loans upto Rs 10 lakh are without Collateral security.


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