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What Is a Business Loan and Why You Should Avail It?

Posted: 26th April, 2021

Updated: 8th February, 2023

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When an individual or a group starts a new business venture, they need a particular amount of capital in order to finance the initial requirements. This capital or credit can be raised through different mediums such as personal finances, investment from outside entities, friends and family and many more. But, all these mediums have their own set of limitations. While an investor might be interested in a significant portion of business or might expect a return in a given frame of time and your own personal finances might deplete at a rate that makes you financially insecure, affecting your business performance in a way that causes hindrances in growth. In the face of such circumstances, a Business Loan is the best instrument of secure and consistent funding for your business.

Business loan lenders are institutional investors and have an accurate idea of the potential of your business and the extent of your requirements. Their returns depend upon the loan tenure and not the mechanism or nature of your business. Such commercial loans should be availed because of their flexible tenures and hassle-free liquidity options.

Types of Business Loans

There are many types of business loans, which cater to different sets of requirements. A borrower should know the types of business loans available in the lending sector, an insight that will help him/her to make better decisions pertaining to availing a business loan.

  • Term Loans :The loan tenure for Term loans are shorter in duration, and they are availed when a consumer purchases or creates assets or space for a short period of time.
  • Project Financing : These are long term loans that are leveraged to acquire or sustain large assets such as heavy machinery, industrial goods, real estate projects, infrastructure e.t.c. The average tenure period for these loans is 10-15 years.
  • Balloon Loans : A manifestation of Term loans, balloon loans have a feature through which a borrower can pay only the interest amount during the loan tenure, and the principal can be returned at the end of the loan tenure.
  • Cash credit working Capital Loans : Every business has a working capital cycle, which starts from acquiring the raw material to delivering the finished product. This cycle may be capital intensive, and a business owner may need some credit in it. Cash credit working capital loans are designed for such needs and are secured against asset or account receivables.

Business Loan Eligibility Criteria

Like many factors, a Business loan eligibility criteria varies with the bank or NBFC. But there is an overarching layer of general requirements such as age criteria which ranges from 18 to 70 years, a declaration of existing credit obligations, a minimum annual turnover of 20-25 lakhs, 700+ CIBIL score, proof of Permanent residence, e.t.c. These Business Loan eligibility criteria define a minimum cap that the borrower must ensure to cover before applying for a loan.

Importance of a Good Creditor

A good Small and Medium Enterprises loan (SME Loan) is the one where the interest rates are low, loan tenure is flexible, documentation is minimal, and liquidity is quick and hassle-free. These features act as a foundational framework through which a borrower can evaluate a business loan, and they largely depend upon the creditor chosen. Different SME loan creditors, be it banks or NBFCs, have different sets of regulations for availing a loan. The best creditor is the one whose offering synchronously aligns with the customer requirements and eligibility.

Shriram Finance MSME Loan

The research will show that the MSME loan offered by Shriram Finance stands steadfast against the framework mentioned. As far as the question of the degree of alignment of offerings with requirements goes, the customizable loans offered by SCUF are one of their kind. A borrower can simply mention the needs, and the agile loan disbursal process and features will ensure that all those requirements are met in a timely and smooth manner.

Features of Shriram Finance MSME Loan

  • Interest Rates : The Interest rates, which start from 15% based on the eligibility of micro, small and medium enterprises and professional individuals, are quite low relative to industry standards. The SME Loan solutions offer competitive interest rates based on each profile.
  • SME Loan Application Process : The SME Loan Application Process is completely digitized and simplistic. The digital touchpoints ensure that all communication and data transfer happens in the comfort of your home.
  • Minimal Documents required for Business Loan : The Documents required for Business Loanare minimal. All one needs are identity proof, valid address proof, Income proof documents, ECS, and a security pledge.
  • Credit score required for Business Loan :The Credit score needed for Business Loan is 650+. The strength of collateral also has its own weightage, along with a declaration of existing credits.
  • Streamlined Working Capital :A competitive interest rate and a loan solution that helps you secure your capital by customizing itself according to the working capital needs ensures that your business model works in a planned and phased manner.
  • Fast and Secure Processing :After validating the eligibility criteria and documents, a borrower can sit back and relax as the loan approval and disbursal process takes place in no time.
  • Low Processing fees :A processing fee of less than 2% is one of the finest that you can find in the lending sector.

All you need is to visit the Shriram Finance website and gauge your monthly instalments through the inbuilt Business loan calculator. This will help you plan your budget and other costs accordingly. You can see all the documents needed on the site itself and can take appropriate measures to keep your documents handy. Once done, you simply have to click the “Apply Now” button and fill in all the necessary information, following which agents from Shriram Finance will contact you to assist you until the loan amount is transferred to your bank account.

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