Commercial Loan
Apply for instant business loans up to 2 crore at competitive interest rate for manufacturing, trading or services. Special schemes are available for women entrepreneurs, young start-ups and existing small business. Check your business loan eligibility and applicable business loan interest rate using online calculator.
Looking out for Loan
Get high business loan eligibility
Before applying for the loan, prepare a business plan, know your credit score, decide the loan amount, do some market research on available business loan options, and keep the documents ready.
Common documents required
Proof of address & photo identity proof of the promoters, business proof, income proof, partnership deed for partnership firm, articles of association, memorandum of association, board resolution, PAN card, etc.
Criteria for business loan approval
Applicants should be aged between 21 to 65 years, having business vintage of a minimum of 3 years. The minimum business turnover and a minimum annual turnover as per the ITR will be required. The business should be profit-making for at least the last 1 year.
Key Features of the Commercial Loan
Following are the key features of Commercial Loan:
- Purpose: To meet the financial requirements of the business, including the purchase of new plant and machinery, to replace the existing plant and machinery, building infrastructure, expanding the business, etc. required to take the business to a greater level. Also, working capital finance is extended to provide for the day to day operational cost of the business.
- Loan amount: The loan limit depends on the project for which the finance is required. The assessment is based on the vision of the business through the projected financial statements for years up to which the repayment is fixed, the profile of the promoters, expected cash flow from the business, and other factors.
For projects where the loan required is above 2 Crores, the project appraisal will be done by a team of skilled persons from the Project Finance Department (PFD) of the bank/financial institution. Based on PFD, liquidity ratio, Debt Service Coverage Ratio (DSCR), Fixed Asset Ratio, and various other factors, the quantum will be decided.
- Interest: The rate of interest varies from lender to lender., depending on the loan quantum, the project for which the finance is sought, line of activity, the business sector, and the customer’s profile.
- Security: The security depends on the quantum of loan and also the business sector.
- Usually, for a loan up to Rs. 2 Crores to MSME Sector, no collateral security is insisted. The loan will be covered by the Credit Guarantee Scheme.
- Normally the primary security will be by way of hypothecation of the stocks and receivables if the finance is for working capital.
- Hypothecation of the assets created out of the bank finance if the loan is for capital investment.
- Collateral security by way of residential/commercial property will be required.
- The agricultural property will not be accepted unless the finance is for agricultural and allied activities.
- Repayment: The working capital finance is short-term finance provided for a period of 6 to 12 months, which will be renewed on an annual review. The repayment period for term loans ranges from 3 years to 8 years and even up to 20 years if the construction of business premises is involved.
- Processing fee: Processing fee also depends on the nature of the activity and the business sector but generally will be up to 3.5% depending on the bank/financial institution.
- Prepayment charges: Some of the lenders do not collect any prepayment charges while others charge Nil to 6% on the outstanding balance.
Types of Commercial Loan
The following are the common eligibility criteria for a Business Loan:
- The applicant or the promoters of the business should be in the age group between 21 years to 65 years.
- Proprietorship/ partnership firms and Pvt Ltd companies, self-employed individuals/ professionals engaged either in manufacturing, services or trading.
- A business vintage of a minimum of 3 years.
- A minimum business turnover and a minimum annual turnover as per the ITR will be required. The quantum of the requirement will vary from lender to lender.
- The firm/company should be profit-making for at least a period of 1 year.
Documents Required for Commercial Loan Application
The following are the common documents required for a Business Loan:
- Proof of address of the promoters: Aadhaar Card, Voter’s ID Card, Driving Licence, Utility Bills, etc.
- Photo ID proof of the promoters: PAN Card, Passport, Voter’s ID Card, Driving Licence, etc.
- Proof of business: GST Registration, Trade Licence, Registration under Shop Act, Drug Licence, etc.
- Income proof: Balance Sheet and Profit & Loss Account audited by an Auditor with Auditor’s report.
- Other documents:
- Partnership Deed in the case of Partnership Firm.
- Articles of Association, Memorandum of Association, and Board Resolution as per the format provided by the lender in the case of a Company.
- PAN Card of Partnership Firm/Company.
- National and State Permit if finance is availed for a commercial vehicle.
How to get a high Commercial Loan eligibility?
- Prepare a business charter containing the details of your business plans for the next few years.
- Be aware of the credit score of the promoters as well as the company before approaching the lender.
- Decide the quantum as knowing the right quantum of loan is also a mandatory requirement.
- Do a bit of market research to understand the various options available for Business Loans in the market.
- Shortlist the options that suit your requirement and also check for the interest rates and other associated charges for the loan.
- Look for the lender which does not have elaborate approval procedures.
- Be aware of the documents required and keep them ready before applying for the Business Loan.