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Types of Business Loans

Business loans come in different types, catering to various business requirements:

  • Term Loans: Fixed amount borrowed for a specific period, repaid in EMIs.
  • Working Capital Loans: Short-term funding to cover operational expenses like rent, salaries, and inventory.
  • Secured Business Loans: Loans backed by collateral such as property, equipment, or inventory.
  • Unsecured Business Loans: No collateral required, but interest rates may be higher.
  • Equipment Financing: Loan used specifically for purchasing machinery or equipment.
  • Invoice Financing: Funding against pending invoices to maintain cash flow.
  • Overdraft Facility: Borrowing money up to a pre-approved limit from a bank account.
  • MSME Loans: Special loans for Micro, Small, and Medium Enterprises (MSMEs) to support growth.
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Eligibility Criteria for Business Loans

Lenders evaluate several factors before approving a business loan:

  • Business Vintage: Most lenders require a business to be operational for at least 2-3 years.
  • Annual Turnover: Businesses with stable revenue have a higher chance of loan approval.
  • Credit Score: A good credit score (above 750) increases loan approval chances and ensures better terms.
  • Financial Statements: Lenders assess income tax returns, profit and loss statements, and balance sheets.
  • Collateral (for Secured Loans): Some loans require assets as security.

Documents Required for Business Loans

The documentation process varies by lender, but common requirements include:

  • Identity Proof: Aadhaar Card, PAN Card, or Passport.
  • Address Proof: Utility bills, rental agreements, or business registration documents.
  • Business Registration Proof: GST registration, shop license, or company incorporation certificate.
  • Financial Statements: Bank statements, audited profit & loss statements, balance sheets.
  • Income Tax Returns (ITR): Last 2-3 years of ITR filings.
  • Collateral Documents: Property papers, invoices, or equipment details.
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Challenges

  • High-Interest Rates: Unsecured business loans may have higher interest rates.
  • Collateral Requirement: Some loans require assets as security.
  • Strict Eligibility Criteria: Small or new businesses may struggle to qualify.
  • Debt Burden: Large loans may strain financial resources if not managed properly.

Benefits of Business Loans

  • Access to Capital: Helps businesses grow, expand, and sustain operations.
  • No Profit-Sharing: Unlike investors, lenders do not demand business ownership or profits.
  • Flexible Repayment: Various repayment options are available based on cash flow.
  • Builds Business Credit: Timely repayment improves creditworthiness for future funding.
  • Boosts Cash Flow: Ensures smooth operations during financial crunches.

How to Apply for a Business Loan

  • Assess Financial Needs: Determine the exact loan amount required.
  • Check Eligibility: Review lender criteria to ensure qualification.
  • Compare Lenders: Evaluate banks, NBFCs, and online lenders for the best terms.
  • Prepare Documentation: Gather necessary financial and business documents.
  • Apply Online or Offline: Submit applications via bank websites, loan aggregators, or in person.

Why Choose Login to Loans for Business Loans?

  • Quick & Hassle-Free Approval: Minimal paperwork, faster processing.
  • Flexible Loan Options: Choose the right loan for your business needs.
  • Competitive Interest Rates: Get the best rates from top lenders.
  • Personalized Support: Expert guidance throughout the process.

Eligibility Criteria

  • Business Age: Minimum 1-3 years of operation.
  • Turnover: Meets lender-specific requirements.
  • CIBIL Score: 650+ preferred for unsecured loans.
  • Collateral: Not required for unsecured loans.

Frequently Asked Questions (FAQs)

What is a business loan?
A business loan is a financial product designed to provide funds to businesses for various purposes, such as expansion, purchasing equipment, managing cash flow, or covering operational costs. It can be a lump sum (term loan) or a revolving line of credit, repaid over time with interest.
What types of business loans are available?
Term Loans, Business Lines of Credit, SBA Loans, Unsecured Business Loans, Secured Loans, Microloans, Flexi Loans, Equipment Financing, Invoice Factoring.
Who is eligible for a business loan?
Business Age: Usually 1–2 years (longer for unsecured loans).
Revenue: Minimum turnover (e.g., ₹6 lakh).
Credit Score: Preferred 640+ (higher for better terms).
Financials: IT returns, bank statements.
Registration: Legally registered business.
Collateral: Required for secured loans, optional for others.
What documents are required to apply for a business loan?
Identity Proof (PAN, Aadhaar),
Business Registration (GST, license),
Financials (ITRs, P&L, bank statements),
Business Plan (for startups),
Collateral Details (if applicable),
Statutory Approvals (if needed).
Can I apply for a business loan online?
Yes, most banks and NBFCs offer online applications with minimal documentation. Approval can be as quick as 59 minutes (e.g., SBI's PSB Loans).
Do I need collateral for a business loan?
Not always. Unsecured loans and government schemes (e.g., CGTMSE) don’t need collateral. Secured loans offer better rates but require assets.
What are the interest rates for business loans?
Secured Loans: ~10%+
Unsecured Loans: Higher (e.g., 9.75%+)
SBA Loans: Lower due to government support
Rates depend on credit, financials, loan type, and lender.
How much can I borrow?
Based on lender & business size:
Bank of America: From $10,000
HDFC Bank: Up to ₹75 lakh
Deutsche Bank: ₹10 lakh–₹50 lakh
Most lenders cap at 10–30% of annual turnover.
How long does it take to get a business loan?
Online Loans: 20 seconds–24 hours
Bank Loans: 7–14 days
SBA Loans: ~90–120 days for startups
Timeline depends on documentation & loan type.
What can I use a business loan for?
Working capital, salaries, inventory, equipment, real estate, expansion, hiring, training, debt refinancing (some restrictions apply).
Can startups get business loans?
Yes, through:
SBA Programs
Microloan Providers
Government Schemes (e.g., Mudra, CGTMSE)
A solid business plan and industry experience help.
What if I have bad credit?
Options include:
Alternative Lenders (focus on cash flow)
SBA Loans (with strong plans/collateral)
Post-bankruptcy approvals possible after 1 year
A co-signer or improved credit history helps.

List of Business Loan Banks in India