What is a Business Loan?
A business loan is financing provided to businesses for various purposes like purchasing equipment, expanding operations, managing working capital, or funding new projects. It can be secured or unsecured depending on the loan type and amount.
What are typical business loan interest rates?
Business loan interest rates typically range from 9% to 18% per annum, depending on factors like business profile, credit score, loan amount, tenure, and collateral. Well-established businesses with good credit can get lower rates.
What is the maximum tenure for business loans?
Business loan tenure typically ranges from 1 to 15 years. Term loans for machinery/equipment can go up to 15 years, while working capital loans are usually shorter (1-3 years). Tenure depends on loan purpose and repayment capacity.
What documents are needed for a business loan?
Typically required: Business registration documents, PAN card, ITR for 2-3 years, bank statements (6-12 months), balance sheet and P&L statements, GST returns, ownership proof for collateral, and business plan for new ventures.
What are processing fees for business loans?
Processing fees typically range from 1% to 3% of the loan amount, plus GST. Some lenders may charge a flat fee. This is a one-time fee paid upfront when the loan is disbursed. Always factor this into your total borrowing cost.
Can startups get business loans?
Yes, startups can get business loans through various schemes like MUDRA loans, Startup India programs, or specialized lenders. Requirements may include a solid business plan, promoter's credit score, collateral, and sometimes personal guarantees.
What is the difference between term loan and working capital?
Term loans are for long-term assets like machinery, property, or expansion with longer repayment periods (5-15 years). Working capital loans are for day-to-day operations, inventory, and cash flow with shorter tenure (1-3 years) and sometimes revolving credit.
Are business loan interest payments tax-deductible?
Yes, interest paid on business loans is generally tax-deductible as a business expense. This can significantly reduce your effective loan cost. Consult with a tax professional to maximize these benefits based on your business structure.