Business Loan Application Process Explained Here

For a business to sustain and grow, it is imperative that it enjoys a consistent inflow of funds. While these funds help meet the day-to-day requirements of the company, there are times when investments concerning the expansion of business or purchase of new assets need to be made. Funds for such investments can usually be borrowed from a lending institution, in the form of a loan.

A Business Loan is an unsecured loan which can be taken by a self-employed professional or a business owner. The average amount of this loan varies from a minimum of Rs. 3 Lakhs to a maximum of Rs. 1 Crore, while the tenure of repayment may range from 24 to 60 months, depending on the terms and conditions of the loan.

There are essentially three Types of Business Loans

  • Term Loans

These are meant for business expansion, capital infusion or acquisition of long-term fixed assets including land, building or machinery.

  • Special Business loan for Women Entrepreneurs

These are specialized low-interest loans designed for female entrepreneurs with more than 50% ownership in the business.

  • Working Capital Loans

These loans can be taken with the aim of meeting the operating expenses of a business.

Given the grim nature of it, the requirements to apply for a Business Loan are rather stringent when compared to other investments such as Personal Loans. It is in your best interest to have a fair idea regarding the pre-requisites of the same. Let us walk you through each one of them.

Accounting Records

For any bank to approve a loan for business without security, it is vital for them to know that you maintain a certain level of financial discipline. Hence, even if your books of account are in order, make sure to have a close look at them and eliminate any discrepancies. Banks today are becoming increasingly strict, and this small step will help you put your best foot forward.

You must be aware of the fact that the bank or your online lender may ask for the following papers –

  • Balance Sheet of the Company
  • Profit And Loss Accounts
  • Cash Flow Statement
  • Tax Audit Reports
  • Statutory Audit Report
  • Income Tax Returns for the past year

Additional Documents

In addition to your financial statements, the lender may also ask you to furnish some other details. Your business’ current year’s performance, as well as the projected turnover for the upcoming quarter/year, will be the primary documents that the lender may need. As you may have guessed, it is crucial that these documents have accurate information that can lead the bank to believe in your current standing, as well as your ability to repay the loan in the future.

If you’re applying for a loan to kick-start a new project, it is best that you submit an elaborate project report complete with the cost involved as well as the projection for revenues.

In some cases, banks may also need you to furnish proof of clearance pertaining power, pollution, fire, and safety.

In case, your loan amount will be directed toward the purchase of land or machinery; you will need to offer proof of cost of the same. You will also need to provide the copy of allotment letter/conveyance deed.

Credit Rating

A credit rating is essentially a rating provided by a comprehensive analysis of various factors affecting the business. These include – financial strength, market dynamics, and competitive position of the enterprise, operating efficiency, management capability, customer profile, credit history and relationship with various stakeholders.

In a vast majority of cases, businesses with an excellent credit rating procure loans at a substantially lower interest rate than a company without one. In fact, in some cases, having a credit rating can prove to be the deciding factor for the approval of the loan.

Hence we strongly suggest getting your business analyzed and rated so that getting your loan approved becomes as easy as a piece of cake.

Now that you know all about Business Loans, their types, and the factors that have a direct impact on their approval, we are sure you are well prepared to apply for one. However, before you do so, make sure you do some homework. By this we mean, simply list down 2-4 lenders that you want to approach. Next, look at the requirements of each lender and their specific loan offers, Depending on what suits you best, pick a lender. You can then go ahead and put in your application.

Simple, isn’t it?

Also Read: 5 Most Common Types of Loans in India

To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit, the leading online lending marketplace that offers financial products from 60+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.

Talk to our Loan Specialists toll-free at 1800 103 4004 to know more about our products and offers.