A business loan is an unsecured loan granted to a professionally qualified person providing professional services as an individual or as a business. Typically, professionals such as doctors, accountants, and business secretaries are eligible for business loans. These loans are given to professionals to meet their personal or professional needs. But if you are a professional, should you opt for this type of loan? Let’s take a look.
Eligibility and Benefits: These loans require minimal documentation, offer the most competitive interest rate, have minimal fees such as processing fees, and have no hidden charges.
Manish Chaudhari, Head of Digital and Business Alliance, Poonawalla Fincorp, said: âEligibility for a business loan is based on income and existing obligations and also takes into account the credit history of the business. customer. “
He added: âSome unique features of these loans are that they offer the possibility of making a partial payment and no prepayment charge is taken in case the customer wishes to make a prepayment from their own sources. . This makes it a more affordable and smarter choice because clients can maximize the output of their interests. “
Other than that, the loan does not require any physical signing of documents or delivery of post-dated checks. The process is done through an online electronic signature of the loan agreement and the e-NACH (EMI repayment instrument), which makes it suitable for the current pandemic situation. A top-up is available in the future if the customer wishes to take out an additional loan, Chaudhari added.
However, you should be aware that the eligibility criteria will differ from bank to bank or lender to lender.
Therefore, you should always check if you meet the eligibility criteria before applying for a business loan.
Required documents: The documents required to qualify for these loans are very basic such as proof of professional qualification, Know Your Client (KYC) documents, bank statements, and proof of employment or business. With these documents, the application can be submitted online for instant loan approval and disbursement.
A professional can also avail the loan offline by visiting the nearest branch of the lender from whom he wishes to avail the loan.
Comparison: Business loans rank over personal loans because they offer benefits like better pricing, flexible occupancy options, lower processing fees, higher loan amounts, and various personalized offers. These loans are tailor-made, taking into account the requirements of the professionals.
Chaudhari said, âBusiness loans are generally cheaper than personal loans and start as low as 9.99% per annum for salaried and self-employed professionals. For example, if we take a ??10 lakh professional loan at 9.99% for 36 months vis-Ã -vis a personal loan at 12%. A business loan can save at least ??34,000 interest payments only during the term of the loan. Suppose the business loan offers features like partial payment at no cost and full prepayment at no additional cost. In this case, interest outflows can be further reduced and optimized based on the cash flow of the business. “
The overall average ticket size to qualify for business loans generally varies between ??10 lakh and ??12 lakh.
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