- Know different types of business loans.
- Some important documents needed for taking business loans.
- Top banking and non- financial institutions who offer business loans.
As we know, every type of business requires money. If you need money, it shows that your business is running in a positive way. There are various types of business loans available to you. You can opt which loan is suitable for your business to fulfil the requirements. These loans can be provided on your capability, practices, nature of the business, vintage, previous tracks, revenue and more. Below is a list of different types of business loans.
Variety of Business Loan for Business Expansion
- Professional Loan
- Term Loan
- Working Capital Loan
- Medical Equipment Financing
- Invoice Financing
- Merchant Cash Advance
- Machinery Loan
- Line of Credit Overdraft
As names only suggest that this loan is meant for the professional such as Doctors, Architect, Chartered Accountant, Company Secretariat. This loan is basically meant only for the professionals only. To get a professional loan you have to provide your professional degree in which field you are the professional. This loan can be provided on the basis of your Practise.
- If you are a professional, you can take a loan at a lower interest rate than other loans.
- You can use this loan for multiple purposes according to your profession.
A Term loan is a loan which can be taken for the business and personal purposes that can be paid off within a certain period of time. The schedule of the repayment of the loan will be Equated Monthly Installment (EMIs) and quarterly basis. You have to pay this amount to the lender with the interest rate and principal amount. They charge nominal interest rates.
Advantage of Term Loan
- There is no restriction on using the loan amount. You can use this loan for any purpose that is suitable for your business.
- This loan is hassle-free, minimal documents and disbursed in your account very quickly.
Working Capital Loan
The working Capital Loan is the loan which can be taken at the time of shortfall of cash. This loan can be taken when you do not have enough cash for your day to day business operations. Basically the working capital loan is between 6-12 months hence the interest rate will be decided based on your business.
The Working Loan can be Calculated as:-
Working Capital = Current Assets – Current Liabilities
Advantage of Working Capital Loan
- This loan can be easy to avail therefore tenure period is also short between 6-12 months.
- This loan can work like a credit card. In which you have a fixed amount available.
Medical Equipment Financing
If you are a doctor or you are practising or need to open a new clinic so get a medical equipment loan. The amount depends on your creditworthiness. This loan can be used for the various purposes CT scanners, Colour dopplers, Sonography Machines, MRI machines, X-ray machines and more.
Advantage Medical Equipment Financing
- This loan can be used for any type of medical purposes.
Basically machinery loan is a type of business loan that helps build to grow your business very fast. With a machinery loan, you can buy new machinery or update your old machinery for your business purposes. This is the best way to increase your overall business productivity and earn a high return on your production. So without collateral machinery loan is favourable for small enterprises.
Advantage of Machinery Loan
- You can increase your daily productivity.
- If you use the latest and updated machinery it helps in improving the quality of the products.
- Good machinery also reduces the possibility of defect products.
- Better machinery always has a better turnaround time (TAT) and gets the product on time.
Invoicing financing is a small type of loan that borrowers can take to expand the business. It helps to meet your short term requirement of the business.
Advantage of Invoicing Finance
- You can get access to cash without needing a loan.
- With the help of invoice financing, you can improve your business cash flow.
- Funds can be available very quickly.
- You did not provide any kind of security.
Merchant Cash Advance
Basically the merchant cash advance is suitable for those who do transactions through card swipe. This type of financing is available for businesses that have a high volume of card sales such as retail stores, restaurants, medical stores and more.
Advantage of Merchant Cash Advance
- You can use this money for any purpose that you like.
- This type of fund is very easy to obtain and cash advances have a high approval rate.
Line of Credit
A line of credit is a type of loan, this loan can be used as a credit card. You have the option to set the amount according to yourself, but only you have to pay interest on the withdrawal amount. This is the kind of business loan only.
Advantage of Line of Credit
- This line of credit is usually cheaper than using a credit card.
- You can withdraw up to 100% of your limit without any restrictions.
List of Some Financial Institutions for Business Loan Offers
This is a list of banking and non-financial institutions that offer business loans:-
- ICICI Bank
- HDFC Bank
- Axis Bank
- Kotak Bank
- Indusind Bank
- IDFC First Bank
- Bajaj Finserv
- Fullerton India
- Tata Capital
Documents Needed for Taking Business Loan
- Pan Card
- Passport Size Photograph
- Identity Proof – Aadhar Card, Pan Card, Passport, Driving Licence, Voter Id
- Address Proof – Aadhar Card, Voter Id, Passport, Electricity Bill, Utility Bill
- Business Continuity Proof
- Latest Bank account statement
- Balance Sheet
- Profit & Loss Account
- Income Tax Return (ITR)
- Memorandum and Article of Association
Note – All the documents certified by a Chartered Accountant