The capital of India, Delhi, has the most prominent businesses and most significant brands in the country. If you are a business owner, you will be familiar with the number of SMEs in the city. New SMEs are coming up every few weeks, and they have fund requirement time and again. Businesses need money to survive, and a business loan is an ideal solution for an MSME. When you put money into a business, you take the business to its potential. Arranging money can be a huge task, to begin with, if it is a huge sum you require. There are very few people who offer to help you with the funds, and this is where a business loan in Delhi will help you overcome any circumstance.
Business loans can be categorized into different types based on the purpose of borrowing. The interest rates, application process, and terms of the loan differ based on the type of loan you seek. It is essential to be aware of the different types of loans to choose the right one based on your requirements. Top business loans are discussed below.
Term loan: One of the most common business loans is a term loan. It is a loan provided for the purchase of long term fixed assets like land, machinery, or a building. There is a fixed repayment schedule in the loan and an interest rate, which is either fixed or floating. The normal tenure of the loan is anywhere between 2 years to 10 years. The quantum of the loan is usually restricted to 85% of the total expenditure. It is ideal for high-value investment.
Loan against property: A loan against property is available for commercial or residential or vacant land. In this loan, you need to provide an asset as collateral security to the lender. The funds will be raised based on the value of the asset you pledge. You can use the funds for any business-related purpose, including working capital requirements, staff salary, expansion of business, starting a new business, buying land, etc. There are a high loan amount and a low-interest rate. However, it is essential to repay the loan in due time to ensure that you do not lose the asset. The tenure ranges between 3 years to 15 years and varies on the profile of the applicant.
Unsecured loan: An unsecured business loan is a form of borrowing where you do not have to provide any asset as a security. It is a prevalent form of business loan in Delhi. The loan is popular because of no requirement of an asset, and it carries a low risk. The interest rate is slightly higher in this loan because of the risk associated with the lender. It is an ideal loan option for those who do not own any assets in the business and have no credit history. The loan helps build credit with regular repayment. Since there is no valuation of the property or verification of documents, the loan is approved faster and will give you access to funds for your business at the earliest.
Working capital loan: Working capital is the fuel of a business, and in case of inadequate working capital, the business could come to a standstill. A highly preferred form of borrowing, working capital loan helps businesses continue their business operations without any trouble. The loan is available for a short period and has a high-interest rate. It can be used for purchases, payment of salary, or for short terms of business purposes like advertising and marketing.
Cash Credit Facility: A cash credit facility is a loan granted in the form of an overdraft over the security of raw materials or inventory. It can be availed by pledging current assets. The limit is based on drawing power that is arrived at after the deduction of margin fixed by the lender. The margin requirement is around 80%, and renewal is every 12 months. It is an ideal option for financing working capital.
Letter of credit: A letter of credit is a borrowing facility where the bank guarantees the seller that he will receive payment on specific conditions. If the buyer is unable to make the payment, the bank will provide for the outstanding amount. It is issued for domestic and international trade transactions to ensure that the payment will be received even when the buyer and seller are in separate countries. There is a margin requirement of 70% based on the profile of the applicant.
Equipment financing: Every business needs to invest in technology and machinery to keep up with the competition. There are new equipment and machinery available in the market from time to time. Lenders offer equipment financing to help in the cost of buying new equipment for the business. The same equipment can be used as collateral for the loan. The loan is also available for refurbished machinery. A down payment is necessary for loan approval.
Invoice financing: Invoice financing is a quick way to avail cash. It is based on the outstanding invoices associated with businesses. You can avail a loan amount up to 85% of the outstanding invoice. If the invoice remains unpaid, you will have to pay a factor fee every week.
Documents Required For The Loan
To make an application for a business loan, it is necessary to provide the below-mentioned documents.
Proof of continuity of the business
Ownership proof of office or residence
Last six months bank statement
ITR of co-applicants of the last two years.
Audited income statement and balance sheet for the last two years.
ITR and computation of income statements for the last two years.
Loan application procedure
The loan application procedure in Delhi is transparent and straightforward. Once you decide on the loan you seek and the number of funds you need, you can simply make an application. You can make an online application by filling up the form and submitting relevant documents. The loan application will be processed at the earliest, and you will be able to use the funds in no time.
It is important to choose the right type of business loan before you make an application. Depending on the loan amount and tenure, you can choose the one that fits your needs. Check the eligibility criteria and then make a borrowing decision. Different lenders have varying eligibility criteria, and you can make an online comparison. Different types of business loans serve different purposes and can help you achieve your short term and long term business goals. All SMEs are eligible for the loan, and the criteria vary based on the business income and repayment history. Hence, get thorough knowledge of the terms and conditions of the loan before signing on the documents. The tenure and interest rate will vary from one lender to another and from one loan to another.
Indifi is a market leader in the lending space and can help with various types of business loans. With minimal documentation and straightforward application process, getting funds for your business will be quick and convenient.