Everything to Know about Business Loans

businessman pointing hands on the phrase business loan

Business expenses must always be kept separate from personal expenses, although this may not always hold true for small business owners. The score is meant to demonstrate the financial stability of a business, which includes credit worthiness. This credit worthiness is used to know whether a business will be able to repay a loan or not.

Loan Applications checked by Top Credit Bureaus

Businesses often need loans to stay afloat or to expand. It is possible to apply for business loan online through a variety of third-party finance companies which contact the top credit bureaus. The list of these credit bureaus includes names such as D&B, Equifax, and Experian in the US. Business credit scores determine the kind of interest rates as per which loans are sanctioned to companies.

One of the major problems in India and in the world is a lack of knowledge about personal and business credit scores. India as a nation has never been overly fond of credit instruments. Business and personal credit scores have to be considered separately due to the reasons given below:

1. Taxation – All businesses are legally allowed to claim different types of tax deductions, but not without suitable documentation. In the case of an audit, it needs to be shown that all expenses made were pertaining to the business, which is why independent credits are necessary. Without proof, the chances of having to pay high penalties for negligence, late payment, or fraud are high.

2. Personal Assets Cannot be Withheld – As long as the business is structured like a corporation or an LLC and has separate and clean business credit, it will need to show documented proof of the same. This will protect personal assets from being drawn in due to debt.

Getting Information About Other Businesses

Credit summaries show the financial positions of other businesses and help evaluate the financial health of every company. If the company is on shaky ground, the same will show up in the credit summary. A company that gets these reports from a reputed third-party vendor will be saved from losing money in the long run.

An Example of Secured or Unsecured Credit

Any business loan is a form of secured or unsecured credit needed to meet a business’s immediate requirements. Such a loan can serve one or more of the following purposes:

Purchase New Machinery and Equipment
Make Operations Online
Enhance Production
Expanding the Present Business

2020 and part of 2021 have left several businesses in a volatile state, majorly due to the COVID-19 pandemic. A quick infusion of cash into the business helps meet pending payments and also ensures smooth functioning over a long time. Introduction of new technology and new store launches are both possible through business loans.

Documents for Business Loans

The following documents must be brought together for business loan approval:

Company KYC Documents
Bank statements of company over the last six months
IT Returns filed over the last two years
KYC documents of business owners
Business Proof
Detailed report on how the business loan will be used
Photo Identity (Driving License/Passport/Aadhar Card/ Voter ID)

There are two types of small business loans in India:

Unsecured – This loan is disbursed without any form of collateral. Since the risks are higher here, these loans have higher interest rates than secured loans. These loans are often available in the form of pre-approved loans.
Secured – A loan is termed as secured when the business is able to offer collateral in form of machinery, land, farm, vehicle and other items for the loan amount. Due to a lower interest rate than the unsecured loan, this is often the better of the two.

Several Bank Loans Under One Roof

One of the major advantages of getting a small business loan singapore through a third-party website is that B2B customer get to look at the terms from several banks under one roof. Aspects such as processing fees, tenure, and interest rates vary from one bank to another. Therefore, it becomes possible to select the most suitable loan here without searching on other websites.

Age Criteria

A person within the age range of 18-65 years with no past loan defaults will be eligible for a business loan. Along with age, a minimum turnover is also specified for various businesses.

The following entities can apply for business loans online:

MSMEs
Startups
Individuals
Retailers, Artisans and Traders
Closely Held Limited Companies
NGO’s and Trusts
Public and Private Limited Companies
Partnerships, Sole Proprietorship Firms, Large Enterprises, and Limited Liability Partnerships in the trading, manufacturing, or service sectors

Online vs. Offline Business Loans

Compared to online loans, offline loans have been around since long. Physical verification through real visits and filling up forms is necessary. The same verification can also be done online, but trust for offline loans has always been higher.