What is a Business Loan?

● A Business Loan is a type of financing provided to entrepreneurs or businesses to meet their operational, expansion, or capital expenditure needs.

● It can be secured (collateral required) or unsecured (no collateral required).

CALCULATE YOUR ELIGIBILITY


Features of a Business Loan


FeatureDescription
Loan AmountLoan amounts typically range from ₹50,000 to ₹5 crores or more based on the businesses needs and repayment capacity.
Flexible UsageThe loan can be used for purposes like inventory purchase, working capital, office expansion, or new projects.
Interest RatesBusiness loan rates range from 10% to 25% p.a. depending on the type of loan, tenure, and borrowers credit profile.
TenureLoan tenure ranges from 12 months to 5 years, though some secured loans may offer up to 10-15 years.
CollateralCan be secured or unsecured, depending on the loan type and amount.
Repayment Flexibilityncludes EMI-based, bullet repayment, or overdraft options based on cash flow.

Types of Business Loans

  • Term Loan:
    - A fixed loan amount disbursed upfront and repaid in EMIs over a specified Tenure.
    - Used for purchasing machinery, equipment, or business expansion.
  • Working Capital Loan:
    - Used to finance day-to-day operational expenses.
    - Often comes in the form of an overdraft or cash credit facility.
  • Overdraft Facility:
    - A flexible loan allowing businesses to withdraw funds up to a certain limit, only paying interest on the amount used.
  • Invoice Financing:
    - Funds are provided against unpaid invoices or receivables.
  • Loan Against Property:
    - Business owners mortgage their property to avail of a large loan amount at a lower interest rate.
  • MSME Loans:
    - Special loans designed for Micro, Small, and Medium Enterprises, often with government subsidies or lower rates.
  • Equipment Financing:
    - Used to purchase machinery, vehicles, or other business assets.

Eligibility Criteria

  • Age:
    Typically between 21 and 65 years

  • Business Vintage:
    The business should be operational for at least 2-3 years (exceptions may apply for startups).

  • Turnover & Profitability: Minimum annual turnover of ₹10-20 lakhs and consistent profits in the last 2-3 Years.

  • Credit Score:
    A CIBIL score of 700+ or equivalent is preferred.

  • Collateral (for Secured Loans):
    Property, equipment, or other assets may be required for secured loans.

  • FOIR/DTI Compliance:
    Fixed Obligation to Income Ratio (FOIR) or Debt-to-Income Ratio (DTI) should be within 40%-60%.

Documents Required

  • KYC Documents:
    PAN card, Aadhaar, or passport for identity and address proof.

  • Business Proof:
    GST registration, trade license, or partnership deed.

  • Financial Documents:
    Audited financials for the past 2-3 years (Profit & Loss statement, balance sheet).

  • ITR:
    Income Tax Returns for the last 2-3 years.

  • Bank Statements:
    Last 6-12 months’ statements to assess cash flow and repayment capacity.

  • Collateral Documents:
    If secured, property or asset-related documents will be required.

Costs Involved

  • Processing Fee:
    - Typically 1%-3% of the loan amount.
  • Prepayment Charges:
    - Charges of 1%-5% on prepayment or foreclosure.
  • Collateral Valuation (if secured):
    - Charges for property valuation or legal checks.

Benefits of Business Loans

  • Access to Funds:
    - Provides capital for operational or expansion needs.
  • No Equity Dilution:
    - Unlike venture capital, you retain complete ownership of your business.
  • Flexible Usage:
    - No restrictions on fund utilization.
  • Customizable Tenure:
    - Short to long repayment periods based on cash flow.

Key Points to Note

  • Timely Repayment:
    Defaulting on a business loan can negatively impact your credit score and business reputation.

  • Proper Documentation:
    Ensure all financials and business proof are accurate and up-to-date.

  • Business Growth Impact:
    Loans should be used for productive purposes to ensure ROI.

When to Opt for a Business Loan?

  • For working capital needs or managing operational expenses.


  • To expand the business, purchase equipment, or take on large orders.


  • To consolidate debts into a single manageable loan.

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EveOn Money

EveOn Money is revolutionizing the loan landscape in India by connecting small loan Channel Partner with trusted banks, leveraging AI-powered technology, and offering expert in-house loan assistance. We empower Channel Partner, banks, and borrowers with a frictionless and efficient experience throughout the loan journey. "A fintech trademark registered by Bridgeve Technologies Private limited", CIN:U62099WB2024PTC268003.

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