All businesses, whether small or large, need business finance to meet their daily working capital needs and keep pace with a growing market. Businesses need funds for various purposes, including buying equipment, purchasing machinery, renting/buying office space, purchasing raw materials etc.
Small businesses, in particular, require easy access to adequate funds to take advantage of new opportunities. Fortunately, there are several financing options these companies can take.
Business finance options for entrepreneurs
Given are some of the popular business finance options-
- Angel investors: These are high-net-worth individuals (HNIs) who can fund one’s business venture in return for convertible debt or ownership equity. Angel investors offer both one-time funds and regular funds to support start-up companies.
- Line of credit: This business finance option provides a company with a fixed amount of cash every day to help with its daily operations.
- Venture capitalist: Venture capitalists only invest in start-ups that have already shown some traction. They can provide large investments to small businesses for convertible preference shares and debentures.
- Invoice financing: Small businesses can use their unpaid invoices to get funding from NBFCs. This allows them to solve problems with customers/clients taking too much time to repay their bills.
- Equipment loans: Financial institutions give these loans to businesses so that they can lease or buy equipment for manufacturing. The new equipment is used as collateral for this secured loan.
- Term loans: A traditional term loan is a common corporate finance option and can be used for inventory investment, working capital needs, hiring etc. They also offer collateral-free business loans with easy eligibility criteria and fast approval.
- Small business loans- This is the simplest way to gather a considerable amount to invest in a start-up among all the financing options. You have to find the right lender and check the eligibility parameters before submitting your business loan application.
How can small businesses apply for a business loan?
Financial institutions make it easy to apply for business loans with minimal documentation and eligibility requirements. These steps are as follows:
Step 1: Fill up the online application form for the business loan on the selected NBFC’s website.
Step 2: Make sure you check the eligibility criteria. Submit all the relevant documents to complete the process.
Step 3: Get the loan disbursed to your account within 24 hours.
Financial institutions like Bajaj Finserv extend pre-approved offers to make it easy for you to apply for loans. This facility is provided for various financial products like business loans and credit cards. Check your pre-approved offer here in an instant by providing your name and mobile number.
Eligibility criteria for business loans
Any start-up or company looking to apply for a business must fulfil the following eligibility criteria:
- Age: The minimum age to apply for a business loan is 24 years. The maximum age is limited to 70 years at the time of maturity.
- Nationality: The applicant must be an Indian citizen
- Business vintage: The business must be at least three years old
- CIBIL score: Must be 700 or above
Documents required to apply for a business loan
Business owners need to submit only a few basic documents for this business finance option. These documents are:
- Identity proof: Documents like PAN Card, Aadhaar Card, Passport and Driving Licence
- Address proof: Telephone bill, electricity bill, lease agreement etc.
- Financial documents: Includes bank account statement for previous 6 months, audited balance sheet, profit and loss statement for 2 years, ITR copy for the last year
- Proof of business ownership: Partnership agreement, Memorandum of Association, Certificate of Commencement, business registration document
There are several business finance options for budding entrepreneurs in India, including debt financing and equity financing. Of these, business loans are an easy option to apply for, with few requirements for eligibility and documents.