What is a Business Loan?

In India, banks and NBFCs (non-banking financial companies) offer collateral-free and collateral-based business loans. The primary objective of business loans is to help businesses meet their immediate need of working capital. Most financial institutions provide flexible and term loans to meet their capital needs. These loans are available to private companies, sole proprietors, small business owners, global organisations, partnership firms, startups, self employed individuals and shopkeepers.

The global commercial lending market is expected to reach $29,379.83 billion by 2030. But taking out a business loan might seem challenging, especially if banks delay the process and lengthen their paperwork.

Here’s where Yubi comes to your rescue. Our platform brings banking and non-banking financial companies for you to choose from. You can go through the interest rates offered by them and make your selection. There’s no need to look elsewhere when we bring you a one-stop destination to take care of your business loan requirements.

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Apply Business Loan in India

Running a business is daunting, and it doesn’t help if you can’t make purchases and payments on time to leverage opportunities that come your way. That’s why business loans have emerged as a necessary tool for modern businessmen.

The ability to acquire business loans enable small and Fortune 500 companies to conduct business as usual when there’s a momentary cash crunch. The amount of business loan you are eligible for depends on the size of your business and your expected profits. The lender would want to ensure the borrower can repay the loan.

Here’s everything you need to know about business loans and how Yubi makes the process hassle-free and smooth.

What are the Features of Yubi Business Loan?

Features of Business Loan

Yubi is committed to helping small, and large businesses find instant access to funds at the best rates to meet their business needs. Companies can connect with the topmost lenders in India on our platform to apply for a business loan. We offer the following features to provide a seamless and streamlined experience of taking out a loan.

Faster lender discovery with Yubi Match

YubiMatch is our proprietary AI/ML Engine, and it connects borrowers, lenders, and investors. You can get discovered by our 3,000+ enterprises and 750+ lenders to match your specific requirement for large or small business loans. Therefore, you will quickly find your lender of choice and streamline the business loan approval process.

Quicker and smoother disbursal with Yubi Analytics

Our platform guarantees complete transparency, and those on board can expect to close deals 5x faster than on the marketplace. We use YubiAnalytics for a seamless business loan application through the loan amount disbursal process.

Asset tracking with Yubi Monitor

Yubi makes it easier to monitor your assets portfolio, thanks to YubiMonitor. You can keep track of your portfolio and ensure the maintenance of high-quality assets with the data points segmented across automated reports. The reports can be customized, and you will get early warning signals to always stay on top of things.

Access to varied debt instruments with Yubi Automate

YubiAutomate ensures our clients one-click access to a wide range of debt instruments. The solutions are integrated for your convenience.

Quick approvals

The approval process is swift, with minimal documentation. Once the loan application is submitted, it’ll take three to five business days to disburse the loan amount. On our platform, you will readily connect with 750+ lenders and choose the one offering the interest rate.

Zero hidden costs

There are no hidden costs on our Yubi Loans platform. You can directly interact with the lenders and start the loan approval process. On our platform, you can get secured and unsecured business loans.

Ease of documentation process

Back in the day, applying for large or small business loans meant tedious paperwork and strict credit evaluation. Thanks to our platform, those challenges are gone. We can get your business loan application, and approval process started with minimal documentation. You can upload the documents online and wait for us to revert.

 

What is the Benefit of Applying for a Business Loan with Yubi?

 

Simplified paperwork and amount disbursal

Minimal documentation is required to secure a business loan on the Yubi Loans platform. The loan amount will be disbursed once your documents are submitted and verified. We can connect you with 750+ lenders that offer business loans.

Instantly solve cash flow issues for business

Quick loan amount disbursal ensures the continuity of your business. If you face any momentary capital crunch, apply for a loan and solve your cash flow problems.

Business can be launched with confidence

Knowing you can apply and get a business loan online will give you the confidence to launch your business and make it stand out.

Purchase inventory & equipment for expanding your business

When you want to expand your business but run low on working capital, take out a business loan and easily purchase equipment and inventory. A business loan can solve your financial problems instantly.

Build a good business credit score

By taking a business loan, you can work on building a good credit score for your business. If the loan repayment is made within the tenue or earlier, you will have a good score and won’t run into any problems with any future loan requirements.

Customize the business loan

On the Yubi Loans platform, it is possible to get personalized business loans according to your specific business requirements. We can provide you with an instant business loan at the best interest rates.

Favorable interest rates

On our platform, you can browse through the different interest rates offered by the other lenders and choose according to your individualized needs. You can select the lender providing the best interest rate.

Collateral free business loans are available

Not only secured, but you can acquire unsecured business loans on our platforms. Since these loans don’t require security, you can get an instant business loan.

Business Loan Fees & Interest rates

The business loan interest rate in India typically varies between 10% and 21%. However, the interest rate varies from bank to bank and NBFC to NBFC based on the eligibility criteria defined by the financial institution. Besides, the applicant’s profile, business requirements, and credit history also impact the interest rate.

Note that the loan processing charges and other fees vary, and businesses need to get all the information by interacting with the lender.

Some of the popular banks and NBFCs in India offering business loans and their interest rate are mentioned below:

  • HDFC Bank – 10% to 22.50% p.a.
  • Axis Bank – 14.25% to 18.50% p.a.
  • Fullerton Finance – 17% to 21% p.a.
  • ICICI Bank – 17% p.a. onwards
  • Bajaj Finserve – 17% p.a. onwards

What is the Business Loan Eligibility Criteria?

 

The eligibility for a loan on the basis of the annual income of an applicant varies from lender to lender. In general, if an applicant has an annual income of at least Rs.1 crore, he or she is considered to be eligible for an unsecured business loan (or corporate loan). However, there are certain lenders who offer credit to applicants with an annual income of less than Rs.10 lakh as well.

For the Self Employed professional, the individual should possess the required qualifications and skills to apply for a business loan. Some of the qualifications are:

  • The individual must be a citizen of India and between the age of 26 and 66 years.
  • The professional must have a business vintage of three years.
  • Income tax returns of at least one year is needed for the business.

Additionally, chartered accountants, doctors, engineers and management consultants must show a proof of qualification to apply for a loan and get the loan amount approved.

For a limited liability partnership or a proprietorship firm, the organization must have the profit and loss statements to meet the lender’s minimum criteria. Before sanctioning the business loan, the repayment ability of the borrower is assessed.

What are the Other Eligibility Criteria to Apply for a Business Loan?

  1. Self employed professionals, private limited companies, proprietors, partnership firms and startups are eligible to apply for a business loan. These individuals and businesses can be involved in services, trading and manufacturing.
  2. The minimum business vintage required for loan eligibility is 3 years.
  3. For business loan eligibility, the borrower should be at least 21 years at the time of applying for a business loan and should not be more than 65 years at the time of loan maturity.
  4. A registered chartered accountant must audit the balance sheet of the business.
  5. The company should show a turnover of cash profits in the past two financial years.

What Documents are Required for a Business loan?

Documents Required for Business loan

For business loan approval, you will need to produce the following documents.

  • Aadhar Card (Front & Back)
  • Bank Account Statements – Last 12 Months Current Bank Account Statements of the entity (till latest date) for all accounts/ OD accounts (PDF copies generated through Net banking or email from the bank)
  • VAT/Service Tax Returns/GST (whichever is applicable) for the last year of the business entity
  • PAN of the entity and Date of Birth of the proprietor/partners/promoters (in case the application form is not filled)
  • KYC documents must be submitted if there are any co-applicant.
  • Proof of activity in case of proprietorship firms and copy of partnership deed in case of partnership firms

For proprietorship firms, any one of the following documents can be accepted as proof of activity:

  • Registration certificate (in the case of a registered concern).
  • Certificate/license issued by the municipal authorities under Shop & Establishment Act
  • GST/VAT certificate.
  • Sales and income tax returns.

What are the documents required for specific applications?

  • The last two year’s detailed ITR computation or balance sheet with schedules is needed for cases where turnover is more than one crore or the business loan required is above ten lacs.
  • For clients from Food/Pharma/Chemical/Oil/petroleum industries, relevant statutory licenses might be required.
  • Provisionals may be necessary depending on the offer sent upon the merit of the case.

What are the Different Types of Business Loans in India?

Types of Business Loans

 

Sector-Wise Business Loan

  1. MSME Loan: MSME (micro, small and medium enterprises) loans are unsecured business loans offered by banks and financial institutions to assist entrepreneurs in meeting various business-related expenses.
  2. SME Loan: SME business loan fund small and medium businesses. The objective is to provide them a single line of credit facility for meeting their borrowing needs. The business loan can be used for long-term requirements or as a working capital.
  3. Startup Loan: A startup business loan can be availed from banks or NBFCs to raise funds for starting a new business or expand your existing business. The interest rate is determined according to the loan amount and repayment tenure. The minimum annual turnover of your business must me two lac and your business should be operational for two years. You can apply for the loan online.
  4. Corporate Loan: A corporate loan is given to businesses to meet their working capital needs for day-to-day expenses. You can get a business loan that’s secured or unsecured and use the amount to generate more revenue and focus on your company’s growth. Corporate loans are typically offered to businesses with a proven track of profit and has been established for two to three years.
  5. Enterprise Loan: An enterprise loan is a type of working capital loan given to micro, small and medium enterprises. You can also get a loan to meet your long-term business requirements. Apply for the loan online and decide whether you need overdrafts, short-term loans, anchor financing or supply chain financing.

Collateral Business Loan

  1. Unsecured business loans: Collateral-free or unsecured business loans don’t require security. While the interest rate is higher because the lender assumes a higher risk, the unsecured business loan amount is disbursed more quicker. That’s why it is one of the most popular types of small business loans.
  2. Secured business loans: If you provide an asset as security (other business, your home, etc.) while applying for a business loan to the finance company or bank, you are taking a secured or collateral-based loan. For secured loans, the interest rates are lower compared to collateral-free business loans. The loan can be used for real estate, purchasing equipment, or working capital.
  3. LAP (Loan Against Property): LAP loans can be availed by self-employed professionals, small business owners, or medium businesses. It is a loan against property and you will get this after mortgaging your property. That’s why this type of loan comes under the secured loan. You can use the loan amount for business expansion or new businesses.

Business Loan Vendor Types

  1. Banks: Banks are government-authorized financial institutions providing banking services to the general public. They even provide business loans to small businesses, medium enterprises, and global organizations. They offer low-interest rates, quick approval, and minimum documentation. But there’s a minimum turnover requirement and the loan can be availed for a maximum tenure of five years. The loan can take care of your working capital needs or long-term business needs. Instant approval might be provided if your paperwork is in place.
  2. NBFCs: NBFCs or non-bank financial companies are entities that offer bank-like financial services but they are unregulated and don’t hold a banking license. These financial institutions provide short-term and long-term business loans with flexible tenure and instant approval guarantees. You can also avail of collateral-free business loans and collateral-based business loans. Fill in an online form and submit your documents to get the process started.

Other Common Types of Business oans

1. Bank Overdraft/Credit Line

A bank overdraft or credit line is not a conventional business loan.

A Bank line of credit is similar to debt financing. Instead of receiving a lump sum amount that businesses have to pay back in installments, a credit line operates as a credit card for businesses. Companies can use money as needed. Therefore, you are not assuming the risk of borrowing too much.

An overdraft facility is a type of funding offered by banks where account holders can withdraw money from their accounts even if the bank account balance is zero. The interest rate is charged on the utilized amount from the sanctioned limit. The overdraft limit is revised yearly and offered against securities or collaterals.

2. Equity Funding

Equity financing is a funding option where business owners have to sell shares or their stake in the business in lieu of capital or money. It is one of the most popular methods of raising funds for a new businesses, startups, PEs, VCs, and angel investors. There are different types of equity funding, such as Royalty Financing, Initial Public Offering, Venture Capital, Mezzanine Financing, etc.

3. Term Loan

Term loans can be categorized into short-term and long-term business loans. It is a loan that the borrower must repay in regular payments over a stipulated period. The repayment tenure can range between five months to twelve years. The unsecured term loans are offered up to one crore, but they can exceed based on business requirements. At the time of finalizing the loan application, the repayment tenure is set by the lender.

4. Equipment Finance

The equipment financing or machinery loan is offered to businesses to upgrade their existing machines or purchase new equipment/machinery. It is primarily used by large enterprises and companies engaged in manufacturing. This loan offers tax benefits to the enterprises, and the loan amount, interest rate, and repayment tenure will vary from lender to lender.

5. Loan on Accounts Receivables

Loans on accounts receivables are a short-term funding option where small businesses can utilize their accounts receivables as security to raise funds from banks. The bank will lend a fraction, which depends on the quality of the receivables. The borrower continues to own the receivables and is responsible for collecting from the debtors. You will get quick approval for this loan.

6. Factoring/Advances

Factoring loans use the unpaid customer invoices as collateral under the agreement that the customer will pay back the amount. The borrower or business owner retains legal ownership of the invoices. The loan application process is simple, and it is easier to acquire factoring loans than traditional unsecured loans for public sector banks. Furthermore, this loan allows business entities to quickly turn their invoices into cash without waiting for the customers to pay.

7. Trade Creditor

Trade credit is an agreement between business entities in which a credit limit is offered to the borrower by the supplier. The credit limit is set according to the current assets and liabilities of the business, the business requirements, the creditworthiness of the buyer, and the repayment capacity. So, the borrower can purchase now and pay later. You can use trade credit when receiving machinery, equipment, or raw materials and paying later or before the stipulated date.

8. Bill/Invoice Discounting

Bill is a funding facility where sellers get an advanced amount at discounted rates from their chosen lender. It involves trading an organization’s unpaid invoices due to be paid to the financier. Thanks to this process, buyers need to contribute interest rates to enhance the revenue of the banks, financial institutions, or NBFCs in the form of interest paid and monthly fees. This type of business loan is also known as invoice discounting because it involves selling bills to invoice discounting firms before the payment due date and at a value much less than the original invoice amount.

9. Working Capital Loans

Companies use working capital loans to meet their daily business expenses, expand purposes, purchase raw materials, augment business cash flow, pay salaries, upgrade inventory, hire staff, etc. These are primarily loans for a short time, and the repayment tenure is up to twelve months. It is typically a collateral free loan, and the business owner doesn’t have to submit any security or collateral when applying for this business loan online.

10. POS Loans or Merchant Cash Advance

POS (Point-of-Sale) loans or Merchant Cash Advance is a mechanism in which enterprise or business owners pay an amount to the suppliers through their daily or future debit or credit card transactions. The repayment facility is typically linked with the credit or debit transactions POS machines at grocery stores, retail outlets, shopping malls, and supermarkets. Under POS loans, the interest rates are higher than other types of business loans. Merchants opt for POS loans to overcome the liquidity crunch in business.

Business Loan EMI and How to Calculate It

The EMI calculator uses a reducing balance method to calculate the business loan EMI and the total interest payable by the user. The business loan EMI is calculated according to your loan amount, the rate of interest quoted at the time of loan amount disbursal, and the total loan tenure. The critical data for calculating the EMI are Principal, Interest Rate, and Tenure. Additional charges, like documentation charges, processing fees, etc., are added later.

How to Calculate Business Loan EMI?

Businesses can calculate their business loan EMI by entering the basic details of their business loan, such as the Principal, Interest Rate, and Tenure, into the online business loan EMI calculator.

The mathematical formula for calculating EMI is P X r X (1 + r)n/ ((1+r)n – 1). Here, P is the loan amount, r is the interest rate, and n is the tenure in number of months.

Apply online for a business loan in 5 easy steps

  1. Determine how much loan you need.
  2. Sign up on the Yubi Loans platform to get onboard. Once registered on our platform, you can explore 750+ lenders and go through their interest rates and business loan criteria. You can also interact with the lenders on our platform to make an informed decision.
  3. Review your loan options and determine which type of lender best fits your specific loan requirement and business needs.
  4. Gather all the required documents to complete the application process.
  5. The approval process will take a few days and the loan amount will be disbursed to your account at the earliest.

FAQs

Our Yubi Loans platform is perfect for meeting your business loan requirements because you can connect with over 750 lenders and interact with them. Our platform’s registration and onboarding process is simple and takes only a few minutes. Once you have been onboarded, our YubiMatch facility will help you discover the top lenders on our platform. You can peruse the list of lenders and get access to funds instantly at competitive interest rates and with flexible repayment tenure.

We require minimal documentation, and you can upload them online. Also, you have access to unsecured loans and the flexibility of selecting the loan repayment option that suits your specific needs. The loan disbursement process is hassle-free and quick. You can even monitor your assets portfolio and receive custom reports and warnings. You can count on instant loan approval, so the continuity of your business isn’t impacted due to momentary cash issues.

Business loans are offered to self employed professionals, partnership firms, sole proprietorship, closely held public limit companies, private limited companies, startups, MSME sector, small businesses, large enterprises, etc.

Business loans help businesses get an infusion of finance to meet daily expenses or growth requirements. You can also propel your company forward if it is at an initial stage to get the momentum it needs.

You can get a business loan to meet your short-term or long-term financial needs. Whether you need to buy equipment or machinery, address working capital shortfalls, start marketing campaigns or purchase raw material/inventory, getting a loan with flexible repayment options can assist you in meeting your requirements without any fuss.

Some of the charges and fees you might incur during the loan process are below.

  • BPI or broken period interest: BPI is the interest applicable for loans disbursed after the fifteenth month. It is calculated pro-rata for the rest of the month from the time of loan disbursal. It is because EMI charges are calculated from the second month, and the first month is considered a free period where you won’t be charged any interest or EMI.
  • Interest rate: The interest rate is the cost of taking the business loan, and it depends on several factors that can impact your loan eligibility, such as your age, credit history, annual turnover, etc.
  • Processing fee: It is the fee charged on your loan application processing.
  • Penal interest: If you default on repayment or delay EMI payments, you will be charged interest on the late payments.
  • Bounce charges: If you miss your EMI, you will be charged a fee.
  • Document processing charges: The fee for verifying the documents you have submitted with your loan application.

All our charges and fees are transparent. You can even interact with the lenders to clear your doubts regarding the charges and seek a breakdown.

You can get a business loan by registering on our Yubi loans platform. Once the onboarding process is complete, you can connect and interact with 750+ lenders consisting of banks and NBFCs. Go through the different funding options offered and get a loan at the most competitive rate and flexible repayment tenure.

Yes, you can get unsecured business loans without security or collateral.

An individual guarantees loans for partnership businesses and sole proprietorships. As a business owner, you have personal and business credit. Therefore, the loan will reflect in your credit score or CIBIL report.

But if the structure of your company is LLC, the business loan will only impact the CIBIL score of your business. It will not affect your personal credit score.

Businesses can take up to seventy-five lac and more. The loan amount depends on your credit history, repayment capability, business assets, etc.

The interest rate is fixed for business loans. It will be decided before the loan is disbursed.

Some banks and NBFCs allow part payments in business loans. However, there might be restrictions on how many times you can part pay in a year. Also, the minimum and maximum amount you can part payment will be decided before loan disbursal. Clarifying this with your lender before signing the loan document would be best.

Yubi works closely with the lenders to try and get the online application form approved as quickly as possible. Once the form and your documents are approved, you can expect the loan disbursal within five to seven business days.

Suppose the request is complete in all aspects and the submitted documents pass the verification process. In that case, you will have the decision delivered within thirty working days from the date of application. You must provide all the required documents to accelerate the appraisal process.

You can avail of loans under the LAP scheme for commercial or self-occupied properties.

The business loan amount can be repaid through ECS or post-dated cheques.

With the help of the EMI calculator, you can calculate the interest payable and the EMI amount. You will even gain access to the amortization schedule. Such information will assist you in the decision-making process and help you find the best and most cost-effective repayment tactics.