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Business Loan

In today’s competitive and fluxing economic climate, a sound financial strategy is critical for organisations to propel and thrive. It is all the more essential in burgeoning businesses, like small and medium-scale enterprises, because of the formidable competition by established companies.

Although their financial capacities are limited, these enterprises can stand out by leveraging external financing benefits. Business loans can assist these organisations in funding their operations and scaling new heights. This article highlights the intricacies of a business loan.

What Is A Business Loan?

Business loans are an unsecured type of funding through a lending agreement between a borrower and his/her preferred lending institution. Here, the lender extends the necessary funds to a borrower, which must be paid back within an agreed-upon period and at a predetermined interest rate. The funds, thus acquired, can be used by enterprises as per their requirements, such as managing cash flow, upgrading inventory, or for business expansion.

What Are the Types of Business Loans?

One can avail a loan for business as per his/her individual needs from several options. There are several types of business loans, some of which are elaborated below:

  • Term Loans
    A term loan entails repayment in regular amounts over a set period. These loans can be categorised into short-term and long-term loans. The tenure of repayment differs likewise, ranging between 1-5 years for short-term and 15-20 years for long-term loans. The loan amount offered in a term loan ranges from Rs. 1 lakh to Rs. 1 crore and may exceed depending upon business requirements and the financial institution.
  • Loan Against Property
    This loan allows business owners to use the value locked up in a real estate property to meet their expenses. It is a secured loan for business wherein lending institutions require borrowers to pledge their property, be it land, residence, or other commercial premises, as a mortgage. The loan amount here depends on the total value of one’s property. Moreover, the pledged asset remains as collateral with the lender until the entire loan amount is repaid.
  • Equipment Financing
    Also known as machinery loans, equipment financing is a financial product that allows small businesses to purchase new or updated machinery. The loan’s interest rate is lower as the equipment in question is assumed as collateral by a lender. Additionally, businesspersons and enterprises availing this type of loan can enjoy tax benefits.
  • Working Capital Loan
    A working capital loan is offered to enterprises unable to fund their everyday operations adequately due to a cash crunch. Small and medium-scale businesses opt for this loan to generate a balance in their cash flow, which is of utmost importance to run any organisation. Therefore, this loan helps business owners to fund their operations and optimise their supply chain management.
  • Start-up Loan
    This loan is offered to new businesses aiming to inject funds into their venture through external financing. The rate of interest charged by a lending institution depends on the loan amount and its repayment tenure. Furthermore, a financier considers a borrower’s credit history before sanctioning the business loan and determining such interest rates.

How To Apply For A Business Loan?

Although the application process varies with every lending institution, the gist of it is usually the same and includes these steps:

  • Find the Right Lending Partner
    Today, businesses can take a pick from a myriad of lending institutions. However, before choosing a financier, business owners must ensure that it caters to their specific requirements. Therefore, one must consider the following factors:

    ✔ Rate of interest

    ✔ Tenure of repayment

    ✔ EMI amount

    ✔ Processing fee and other charges

    ✔ Other terms and conditions

    Instead of comparing multiple lenders individually, organisations can apply for a business loan on MANDII - a financial aggregator where applicants are matched with lending institutions best suited to their requirements and eligibility.
  • Check Eligibility
    Much like the application process itself, the eligibility parameters to avail a business loan in India varies with every financial institution. However, the table below offers a rundown on the generic requirements:

    Age of the applicant

    18 years - 65 years

    Type of business entity

    Sole proprietorship, one-person company, partnership firms, LLPs, SMEs, MSMEs, public and private limited companies, among others

    Business vintage

    Minimum 2 years and in profit

    Annual turnover

    Minimum Rs. 25 lakhs

    CIBIL score

    700 or above


    Indian citizens without default on any previous loan and with no criminal background

  • Apply for Business Loan – Online or Offline
    The next step is to apply for a loan by either visiting the nearest branch of a lending institution or via an online application through their official website. Here, one must submit a list of documents, which includes but is not limited to the following:

    1. Identity proof, like Aadhaar Card, Voter’s ID card, passport, PAN card or driver’s license
    2. PAN Card – For company/firm/individual
    3. Address proof, such as electricity bill, ration card, trade license, or lease agreement
    4. Bank statement of the previous 6 months
    5. Latest ITR alongside Profit & Loss statements, Balance Sheet for the preceding 2 years, after being CA certified/audited
    6. Other mandatory documents like Memorandum of Association (MOA) and Articles of Association (AOA), etc.

A borrower may have to go through additional paperwork during an application. In the case of an online application, individuals need to upload scanned copies of these documents.

India’s present-day dynamic economy calls for a business to retain its spot in the market through a skilful utilisation and augmentation of its finances. Therefore, organisational leaders must not shy away from using the various financing options, such as a business loan, to cement their financial standing.

However, a plethora of institutional sources for the same can be overwhelming, especially when there’s an urgent need for funds. Enterprises can do away with this hassle with the MANDII app. It features business loan options from various leading financial institutions.

This app provides an end-to-end financing solution. To get started, one needs to download the app and submit documents to complete the KYC process. They can apply for different business loans following that.

Thus, the entire process of borrowing becomes more streamlined with MANDII, saving time and minimising effort.