Different Types Of Business Loans

Obtaining the necessary credit at the appropriate time is crucial for any business endeavour. Initial capital and working capital are required to run any industry smoothly. Large scale industries have never had any difficulty in securing credit for their enterprises, because of the perception that they offer the highest employment opportunities to the general population. It is shocking to find out that, large industries employ only 1.25 crore people countrywide. It is the small scale industries which falls under the unorganized sector that employs around 12 crore people in the country. Despite this fact, they always experience a shortage of credit facilities. Numerous Industrial Financing Institutions and Banks, both Public sector and Private sector, have customized SME Loan products to aid the MSME sector in their growth.

This article aims to give a glimpse into some of the small business loans available.

1 To 5 Lakhs Business Loan

Many MSME units find it difficult to obtain loan due to their inability to produce any substantial collateral. To counter this issue, the Government of India introduced the CGSMSE (Credit Guarantee Scheme for Micro and Small Enterprise). Under this scheme the borrower can get a loan of up to Rs.5 lakhs with the Government providing guarantee cover for up to 85% of the loan amount. 

Another option to get such small loan amounts is to go for the MUDRA loan. In this scheme, MSME owners can get loans of up to Rs.5 lakhs under the Kishore category that offers loan amounts of Rs.50,000 to Rs.5 lakhs. Mudra Yojana was launched in 2015 and is designed for all non-agricultural MSME units. Under this scheme, any micro-enterprise involved in trading, manufacturing and service may seek loans up to Rs 10 lakh. 

Borrowers can also approach private financial institutions like Adani Capital or Ziploan for business loans of up to Rs.5 lakhs. These private institutions process loans in just 3 days but may charge higher interest rates. 

MSME Loan In 59 Minutes

MSME 59 Minutes Loan is an In-principle Loan Approval scheme. This scheme collects details of your business unit and issues an in-principle loan approval letter that can be presented to the chosen lender to complete the loan application and avail the loan amount in your bank account within a weeks’ time. The applicant is requested for details pertaining to their GST, IT returns, Business setup and the portal shall offer loan products from authorized banks. If you find the loan terms favourable, you select your preferred bank and pay a convenience fee of Rs.1000+GST. The portal then issues the In-principle Loan Approval certificate which can be taken to the chosen bank to complete the loan process. The entire application process takes less than an hour and hence the namesake. However, the loan disbursal may take up to 7-8 business days.

Some salient features of the MSME 59 Minutes Loan scheme: 

• Promises a loan application and approval time of 59 minutes or less than 1 hour

• Complete online process ensuring total transparency

• Loan amounts starting from Rs.10 lakh up to Rs.5 crore

• Rate of interest starting from 8.50%

• Collateral free loans as this scheme is covered under the Micro and Small Enterprises Loan Guarantee Fund Trust (CGTMSE) scheme

• Loan disbursal within one week from the time of loan approval

Business Loans For Doctors

Setting up your own practice is a dream come true for every Doctor. But that incurs huge capital. Not to worry, banks and NBFCs have loan products specifically designed for professional doctors. The loan amount can be utilized to set up a clinic or to buy medical equipment for your practice or if you are planning to renovate or extend your setup. These loans can be obtained by a salaried or self-employed doctor, hospitals and nursing homes, diagnostic laboratories or by specialized clinics. 

Here is a brief overview of the Doctor loan products available in the market: 

 

Here are some of the Doctor loan products available in the market

Bank	Interest Rates	Lowest EMI per Rs. Lakh for Max Tenure
SBI Doctor Loan	11.20%	Rs. 2,594 for 48 Months
HDFC Bank Doctor Loan	11.25%	Rs. 2,187 for 60 Months
ICICI Bank Doctor Loan	12.99%	Rs. 2,275 for 60 Months
PNB	11.60%	Rs. 2,204 for 60 Months
Bajaj Finserv	13.00%	Rs. 2,683 for 48 Months
Bank of Baroda	10.85%	Rs. 1,704 for 84 Months
Bank of India	10.95%	Rs. 1,710 for 84 Months
Corporation Bank	10.95%	Rs. 1,710 for 84 Months
Central Bank of India	10.85%	Rs. 1,704 for 84 Months
Union Bank of India	12.00%	Rs. 1,765 for 84 Months
IDBI Bank	12.49%	Rs. 1,792 for 84 Months

 

Business Loan For Hotels

Eating out is placed on the top 5 expenses incurred by people. So, setting up a hotel or restaurant is a lucrative business when you get the right funding. There are a number of financing options available for hotels and restaurants. The loan amount can be utilized for purchasing building or premises for your restaurant, purchasing raw materials, license and permits, equipment, personnel, furniture, renovation, marketing, etc. 

Some important points about Hotel & Restaurant loans

• Loan amounts of up to Rs.30 lakh

• Term loans or overdraft facility available

• Age limit of 25 – 55 years to apply for the loan

• Business age should be at least 3 years making profit

• Interest rate ranges between 15 – 20%

• The loan can be applied by individuals, proprietorship firms or partnership firms

Some of the popular loans provided for hotels & restaurants is given below: 

Bank/NBFC Name	Features	Loan Amount	Interest Rate
Bajaj Finserv	Loan can be availed as line of credit and interest charged only on the utilized amount   Collateral free loans	Up to Rs.30 lakhs	18% p.a. onwards
SBI Business Loans	Loan can be availed as line of credit or as term loans Collateral free loans as well as secured loans available Loan amounts up to Rs.20 crore	Need based up to Rs.20 crore	8.25% p.a. onwards
HDFC Business loans	Flexible tenure and hassle free application process Dropline overdraft facility to save interest Collateral free loans available Tenures ranging from 12 months up to 48 months	Up to Rs.50 lakhs	15.65% p.a. onwards
ICICI Bank Business Loans	Tenure up to 36 months	Up to Rs.40 lakhs	16.49% onwards p.a.
Axis Bank Business Loans	Collateral free loans Simple and hassle free application process Balance transfer option available	Up to Rs.50 lakhs	11.25% p.a. onwards

 

Textile Industry Loan

The domestic textiles and apparel industry is one of the major contributors to India’s economy. It has been contributing about 2.3% to India's GDP and accounts for 13% of industrial production and 12% of the country's export earnings. The textiles and apparel industry in India is the country's second-largest employer employing over 45 million people and is expected to employ about 55 million by 2020. The Government has instituted various schemes towards the progress and development of this sector. 

Features of Textile Industry loans: 

• Loans are offered for working capital requirements, both fund based and non-fund based

• Loan amount can be utilized for financing new project, i.e. acquisition/construction of land & building and plant & machinery (including second hand plant & machinery as per guidelines) based on the project cost

• All new/existing units engaged in textile activity as classified under SME Segment are eligible to avail the loan

Some of the banks and NBFCs offering loans specifically for the textile industry

Bank of Baroda	Loan amount of Rs.25 lakhs up to Rs.15 crore  Interest rate from 15% p.a.  Term Loan /Demand Loan, Cash Credit and non-fund based limits  Repayment tenure of 12 months up to 9 years
KVB Textile Plus	Loan amount of up to Rs.500 lakhs Interest rate from 14.8% p.a.
Technology Upgradation Scheme by Government of India	Loan amount of up to Rs.30 crore  Loan available for modernisation and expansion of existing units and for setting up of new units with latest technology in textile and jute industry

 

Business Loan For Retail Shop

Retail shops provide employment to a large number of people in rural as well as urban areas. Business loans offered by banks and NBFCs cater to this segment of MSME entrepreneurs looking to set up their retail business. Many lenders offer collateral free loan to set up retail shops for amounts up to Rs.30 lakhs. These loans can be availed as working capital loans or as a line of credit to suit one’s needs. They come with a repayment tenure of 5 years. Some of the popular retail loan products in the market are given below: 

SIDBI Trader Finance Scheme (STFS)	Min. Rs.10 lakh up to Rs.1 crore 5 years repayment tenure MSME Retailers/Wholesalers including stockists, super-stockists, distributors, dealers, organized retailers including supermarkets, malls, departmental stores, retail chains are eligible to apply for this loan To meet working capital requirements
Bajaj Finserv Loan for Shop	Up to Rs.30 lakhs loan amount Can be utilized to renovate existing store infrastructure, buy a new store or expand store to new markets Flexi loan format allows you to withdraw as much as you want anytime without paying interest on the unused amount Turnaround time of 24 hours for loan approval and disbursal
SBI Simplified Small Business Loan	Drop line overdraft facility Business units engaged in manufacturing, services activities along with self-employed and professional individuals, wholesale/retail trade are eligible for this loan Min. of Rs.10 lakhs and maximum of Rs.25 lakhs Repayment period of up to 60 months
Edelweiss Retail Credit – SME & Business loans	Unsecured loans of min. of Rs.3.5 lakhs and up to Rs.4.5 crore Secured loans of up to Rs.25 crores Loan for working capital requirements, business expansion and sudden work orders Repayment tenure of up to 10 years

 

Business Loan For Traders

Traders can avail SME Loans to set up a new business or modify and expand a current establishment. Generally, trader loans are sought by businesses for build-up of current assets and fixed assets needed for business purposes. Trader loans are usually given to MSME retailers or wholesalers performing functions of stockists, super-stockists, distributors, dealers, organized retailers including supermarkets, malls, departmental stores, retail chains, etc. 

Additional Reading: Business Loans for the Service Industry

Where to get Trader Loans? 

The government disburses financial loans to various SMEs through dedicated schemes built for this purpose. Entrepreneurs can approach various PSU Banks that are authorized to give loans under these schemes. Banks also have their own MSME loan products.

1. Government Banks or PSU Banks (SBI, BoB, PNB, etc)

2. Private Banks (ICICI, HDFC, AXIS Bank, etc)

3. NBFCs (Mahindra Finance, Bajaj Capital, Fullerton, Tata Capital etc)

There are 2 types of Trader Loans: 

• Secured Loans – where the banks need you to submit substantial collateral or guarantee. The rate of interest on these loans is lower. 

• Unsecured or Collateral free loans – where the loan is processed based on a healthy existing relationship with the bank or the profitability of the business. The rate of interest on these loans is relatively higher. 

Some of the banks offering loans for traders: 

SBI	Loan amounts of up to Rs.500 lakhs
ICICI Bank SME Loans	Loan amounts of up to Rs.50 lakhs
HDFC Bank	Working capital finance and term loans of up to Rs.50 lakhs

End note: There are a number of loan products introduced by the Government of India, public sector banks, commercial banks and NBFCs. These loans are both secured and collateral free loans. One has to read the loan terms thoroughly before applying. These finance options are to help established as well as budding entrepreneurs in realizing their business dreams.