Are you a doctor, financial professional, or new entrepreneur? Facing fluctuations in your business is very common. When you own and operate your own business, access to adequate funds is crucial for your business’s growth and success. This is where self-employed business loans come into the picture.

Self-employed business loans offer loans to individuals seeking financial support to fund their businesses. This article will briefly discuss these loans, how to avail them, and some tips that can help you manage your funds better.

Why Do People Choose Self-Employment?

Self-employment in India has increased significantly in recent times. People are now leaning towards starting their businesses, as it offers benefits like flexibility, ownership, and exposure. Business loans help with costs like working capital, buying equipment, or expanding business operations.

Eligibility for Availing Business Loan for Self-Employed

You must ensure you meet the eligibility requirements before applying for a self-employed business loan:

• You must be between 18 and 65 years old
• Only a self-employed individual, proprietorships, private limited companies, or partnership firms can apply.
• Your business should have a minimum turnover (This varies by the loan provider, so check before applying)
• You should have been in your current business for at least three years. As for the doctors, they must be practising for a minimum of 3 years.
• Your business should have been profitable for the past two years.

Documents Required for Business Loans for Self-Employed Individuals

Here are the documents you'll need to apply for a business loan for self-employed:

• Recent photograph
• Valid identity proof (e.g., driving license or PAN card)
• Valid address proof (e.g., passport or electricity bill)
• Bank statements
• Proof of business existence
• GST or ITR documents
• Proof of income

How to Apply for a Business Loan as a Self-Employed Individual

The following are the steps to consider when getting a business loan for self-employed individuals:

• Start by completing the online application form with your details or you can visit the nearest branch of the lending institution to complete the application process.
• Provide your KYC and income documents as required.
• The Bank or NBFC will process your application and verify the details.
• You will receive the loan amount in your bank account once your application is approved.

Factors That Affect Business Loans for Self-Employed Individuals

Several factors may impact your capability to secure a self-employed business loan:

Credit History

Your credit rating shows how trustworthy you are for repaying loans. You must aim for a score of 750 or higher for a quicker loan approval.

A sole proprietor's credit score is also your business's credit score since you and your business are the same. Banks & NBFCs look at all partners' credit scores for partnerships. Partners are only responsible for a certain amount of debt in limited liability partnerships.

Business Age

Getting a business loan can be challenging if your business is less than two years old. However, if your company has been running for a while, you can show your financial stability with balance sheets, bank statements, and income tax returns.

Cash Flow Status

Loan providers prefer to lend to successful businesses likely to repay their loans on time. They use your balance sheets, bank records, and tax filings to check your business's performance. If your revenue is low, it may be harder to get a loan.

Wrap up

Getting a self-employed business loan can help with financial pressures and keep your business running smoothly. To get a hassle-free loan, ensure you meet the eligibility requirements, prepare the needed documents, and understand factors like your credit history and cash flow. Stay on top of your loan management and always repay on time to keep your finances and credit in good shape.

FAQs

1. Can self-employed individuals take business loans?

Yes, self-employed individuals can get a business loan. Banks & NBFCs offer loans for self-employed individuals to help with various business expenses. You must meet the eligibility requirements and provide the necessary documents to qualify.

2. How do you get a business loan if you are self-employed?

You can start by checking your eligibility and gathering documents like bank statements and proof of income. This helps you get a loan as a self-employed person. You can apply online. Then, you can fill out the application and wait for approval to get your loan.

3. What is the easiest way to get a business loan?

The easiest way to get a business loan is to apply online with a bank or an NBFC. You must ensure your documents are ready. Your credit score should be good and must meet the eligibility criteria. Note that quick online applications and fast approvals can make the process smooth and simple.