How Can Small Business Get a Loan in India?
According to the World Bank, India is improving its position on ease of doing business rankings. From the 142nd position in 2014, we jumped to the 63rd position in 2020 due to the Central and State government initiatives promoting small and medium businesses.
Small Business Loan Meaning
In India, any manufacturing and service enterprise with an investment of less than Rs. 10 crores and an annual turnover of less than Rs. 50 crores fall under the category of small business according to the Ministry of Corporate Affairs, Government of India. For medium enterprises, it will be Rs. 10 Crores of investment and a turnover of 50 crores. The existing criterion of the definition of MSMEs is based on the MSMED Act, of 2006. It was different for manufacturing and services units. Since then, the economy has undergone significant changes. Keeping in mind these changes, the Prime Minister decided to further increase the limit for medium Units
While Rs. 4 crores may seem small compared to medium and large-scale company investments, it is considerable for those starting out. At times, an unregistered business may want to scale up and get registered. At others, some companies may be struggling from liquidity crunch befalling some personal or professional emergency. Some may just want to expand their operations and income.
The simplest solution to all these hurdles is availing of a small business loan which is now easier than ever. Most lenders offer fully digitized loan services making the loan disbursement process convenient and instant. Online processing also allows you to do extensive research and comparative analysis to choose the loan that best suits your needs
Why Should You Apply for a Small Business Loan?
Shyam owns a mediocre grocery store in a posh locality of New Delhi. Over the years, he has built a loyal customer base. However, he noticed a dip in his daily sales with the advent of supermarkets. After much deliberation, he decided to upgrade his shop to suit his customers' preferences and expand his shop with trending products like vegan, etc.
After accounting for customer-specific product supplies, he met a contractor and prepared an estimate. But, unfortunately, the estimate exceeded his liquidity, and he wasn't keen on dissolving his fixed deposits and gold. So he decided to search for how to get a loan for a small business in India to realize his dream.
To his surprise, unlimited options were available for a customized, hassle-free loan without any collateral. He had a choice to select his lending partner from India's recognized public and private banks as well as non-banking financial services (NBFC). He made a checklist to rank various options based on the following criteria. His list included the ease of the application process, interest rates, processing and other charges, customization, and turnaround time.
After due diligence, Shyam was able to shortlist the best small business loan, apply for it, and expand his grocery shop to a small supermarket. The only way forward in life is to keep moving and growing. If you aspire to scale your small-scale business but are afraid of upfront money requirements, you can apply for a small business loan.
L&T Finance is your trusted partner to get a loan for small businesses in India with transparency and ease. A small business loan means an unsecured loan of up to 50 Lakhs for a maximum tenure of 60 months. Moreover, we offer the best in industry small business loan interest rate starting from 15.5% per annum.
Often, a loan is accompanied by many other charges contributing significantly to the total loan amount. For example, L&T Finance charges a processing fee of upto 5% (+GST) of the principal loan amount.
Small Business Loan Eligibility
If you are seeking a loan for a small business, L&T Finance lays out simple eligibility conditions like
• The age of the applicant should be between 24-70 years.
• The company's turnover should be above 80 lakhs but should not exceed 250 crores.
• The applicant should be doing business for a minimum of 3 years.
• The business should be profitable for at least 2 years.
How Can I Apply for a Small Business Loan?
If you are wondering how to get loan for small business in India, you should first understand the documents required:
1. PAN details - all individual/Proprietor/Directors/Partners (In Partnership firm or Ltd or Private Ltd entity all partners/directors holding 10% or above) 2. KYC of Entity and co-borrowers 3. Business continuity proof for three years
You will also need to submit documents depending on the program:
• ABB Program – bank account statements of 6 months
• Income Program - eligible income proof like the last 2 years' filed income tax returns, profit and loss statements and audited balance sheets. The income-related documents should be carefully prepared, ideally under the guidance of a chartered accountant, to ensure the smooth processing of the loan. Additionally, you will need to submit proof of filed GST returns and attached bank account statements.
• GST Program - of bank account statements of 6 months, 12 Months GSTR-3B
However, the suitable old method of physical loan application is also available for those who need to be technology savvy. You can visit your nearest L&T Finance branch, call or email with your eligibility documents and apply for a small business loan in India.