Business loan is simply money lent to an applicant by the lender, banker or any other financial institution. Depending upon the business requirements, the loans come under different categories. So you must be clear regarding the loan category and then go in for the one which meets your requirements.
In the present times, availing Business loan has become much more common that past. Additionally, the loan availing process has become lot easier as few years ago. This has happened as a result of rapid growth of the Indian economic and financial scenario. People are more ambitious and looking to set up their own business ventures. So, easy business loanhas come as a great opportunity provided by the banks and other financial institutions. This way one can set up business establishments or to have business enhanced and impact. So, there has been steep increase in the number of loan providers as well. As a result, lending has become a highly organized sector in India. The business loans come under range of types, but firstly you must have a clear business plan in your mind.
1. Vendor finance.
2. Business instalment loan.
3. Equipment loans.
4. Export and import finance.
5. Machinery loans, etc.
But, availing loans are a cumbersome process and usually have complicated and tricky aspects. In fact, availing the loan itself is a difficult process. So, to positively avail a loan you must meet certain eligibility criteria such as:
1. Integrity or character: First is character or integrity. The lender might cross check the applicant's background for any criminal records, any negative family history, and durationof residence at a particular place or enquire anything from his community.
2. Good credit: Second, the applicant should have good credit and must not have any debts, mortgage or non-payment history.He must not owe big debts to others such as institutions.
3. Collateral: The third and the last are collateral. Collateral is simply applicant's property in lender's possession for securing loan in case of non-payment of loan by applicant. It is a very important factor because they fetch good amount even if the applicant's business fails. So, collateral is a major consideration by lenders.
Loans can be divided into two categories. They are:
1. Start-up loans.
2. Secured loan.
3. Unsecured loan.
4. Business only loan.
1. Start-up loans: This is the simplest form of loan. In this category, credit and collateral play the crucial role.
2. Secured loan: This category is based on collateral. This loan is secured by the applicant against his assets called 'secured loan'. In case of default by the applicant the lender can regain his loaned amount by disposing off the client's said assets.
3. Unsecured loans: These loans do not involve any collateral but are dependent on applicant's credit ratings. The unsecured loans are based on the applicant's repayment capabilities.
4. Business only loans: These are meant exclusively for business purposes. Under business only loans, the repayment capacity is based only on the applicant's business and not personal repayment capability.
