Types of Business Loans in India

"The article explains what are the types of business loans in India, get to know about working capital loan, term loan, letter of credit, overdraft facility, machinery loan, business loan under government scheme, point of scale loans."

7 mins read

Published: 16 March 2023

Updated: 19 September 2023

Introduction

Businesses run on capital, human resources, and a profitable idea that can bring change to the existing world. Sometimes, businesses run out of finance, but an owner knows that the idea is profitable in long term. In such situations opting for a loan is the best solution. In India, there are many types of business loans available depending on the needs of the business owners. The article below discusses all types of business loans available for established business owners and business loans for startups. 

 

Quench the financial thirst easily with the appropriate business loan for your organization and pass the financial hurdle with just three easy steps. A business loan can be approved and disbursed within a day if you met the eligibility criteria. Apart from the eligibility criteria one should also have the required documents for a business loan to get the business loan hassle-free. Many banks and NBFCs are helping entrepreneurs and business owners to flourish their businesses without worrying about money. 

 

What are the types of business loans? 

In India, majorly these types of business loans are taken by business owners and entrepreneurs for the smooth running of their businesses. 

 

Term loan 

A term loan is a type of loan set for a tenure starting from 12 months and exceeding 5 years. The loan is further divided into short-term, long-term loans, and intermediate-term loans. A term loan with a short tenure is a short-term loan and a long tenure is known as a long-term loan. A term loan can also be approved without collateral, known as an unsecured loan. It is ideal for business owners who are looking for quick financing for the short term. 

 

Working capital loan 

As the name suggests the working capital loan is given to satiate the financial needs of working capital required to run the business. These loans are taken by MSME business owners, entrepreneurs, and startups. Working capital loans are majorly short-term loans of the loan amount up to Rs. 40 lakh wherein the repayment tenure is up to 12 months or may exceed business requirements. The interest rate offered by Banks/NBFCs is a bit higher, as compared to long-term loans or general business loans.

 

Overdraft Facility

Overdraft facility is the additional availed by bank account holders, they can withdraw a certain amount from their accounts even if they have insufficient funds. Banks allow the borrower to withdraw money in return, the borrower needs to pay the amount with the applicable rate of interest.     

 

Under government schemes

There are many loans that are provided by the government to boost the economy of the country and help business owners to flourish. MSME loans, CGTSME schemes, and Mudra loans are some of the schemes introduced by the government to help business owners. 



Point of Scale Loans 

A business owner operating an operation pays a lump sum payment in advance to suppliers through his or her daily or upcoming credit or debit card transactions through a process known as POS Loans or Merchant Cash Advance. Small business owners frequently run into a short-term liquidity problems. So, retailers choose POS loans to lessen the business's financial crisis. In comparison to other business loan options, the interest rate offered by POS loans is somewhat greater. The payback facility is connected to Point of Sales (POS) terminals for debit or credit transactions that are found at retail outlets, grocers, supermarkets, and shopping centers.

 

Machinery Loan 

Machinery loans are given by NBFC banks to business owners to purchase machinery or equipment. The machinery loan is offered at different rates of interest and at distinct processing fees. The loan can be helpful for large enterprise owners as it can help them to expand their businesses without making money a hurdle. 



Letter of credit 

In a letter of credit, a bank or other lender provides a funding guarantee to businesses that engage in international commerce. This sort of credit limit is primarily employed in the trading sector. Entrepreneurs can use letters of credit for both import and export transactions. Foreign-based businesses frequently work with unidentified suppliers, therefore they need payment assurance before finalizing any purchase. A letter of credit is therefore essential for giving suppliers payment certainty.

 

Conclusion 

 

The article above shall explain to you all the business loans available in India. A business owner is seldom in a need of finance either for expansion or to start up a business. A business loan can be a smart solution for financial assistance. Get the loan approved within a day with minimal documentation at My Mudra. 

 

android apple
VIEW ALL BLOGS