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There are numerous small businesses looking for business loans at affordable interest rates to handle daily cashflow needs. One of the most searched keywords by small business owners online is a ₹25 Lakh business loan. Since this is a small business loan, it is easily obtainable with most lending institutions waiving off the collateral requirement.
₹25 Lakh business loan
There is no loan product called ₹25 Lakh business loan in the market instead there are small business loan products from various lending institutions under which lenders can sanction a ₹25 lakh loan. Many lending institutions provide collateral-free MSME loans with simple documentation
You can also explore lending institutions offering personal loans for business needs. These personal loans range from ₹50000 up to ₹50 Lakh. Personal loans for business are loans taken under the name of the business owner depending on his/her individual credit score. Unlike a personal loan, a personal loan for business is used for business purposes ranging from purchase of new machinery to technology upgrades.
Benefits of a ₹25 Lakh business loan
Applying for small business loans have multiple advantages:
- No collateral required
Numerous lending institutions sanction MSME business loans without the need for collateral. This is because the loan amounts are typically small along with a short repayment period and can be quickly disbursed. Lenders also consider the fact that the risk is minimal with small amounts.
- Easy application process and minimal documentation
A small business loan accompanies an easy application process. For personal loans for business needs, usually, lenders ask KYC details, business details and loan requirement details. You would only have to submit a few documents including shop and establishment certificate, KYC documents, etc., for the loan application process.
- Fast approval and disbursal of funds
Several banks offer instant approval and disbursal of personal loans because the applications are easier to inspect, and the financial institution only needs to go through a few documents to check the credit history.
Business loan eligibility criteria depend on the lending policies of the lenders. Given below are some common eligibility criteria that will have to fulfilled to get a small business loan like the ₹25 lakh business loan:
- Age: Age of the applicant must be above 18 years
- Source of income: The applicants should be employed with a stable source of income. He/she will be required to show proof of income, such as bank statements and tax returns. This will assess the repayment capacity of the applicant.
- Collateral: Even though small business loans typically don’t ask for collateral; some lenders do ask for this requirement. This is to reduce the risk exposure of the lender and also help in offering better loan terms to the small business. Collateral options for ₹25 Lakh business loans include land, commercial property, physical assets like machinery, etc.
- Credit score: As you probably know, borrowers with a minimum credit score of 650 and above have higher chances of getting business loans sanctioned. A higher credit score means lower credit risk for the lender.
- Credit history: A lender will assess credit reports and bank statements to inspect past loan applications and loan repayment Any defaults with respect to business loans will decrease the chances of getting loan approval. A good credit history without any defaults can improve business loan eligibility.
- Debt-to-income ratio: Lenders evaluate the applicant’s debt-to-income ratio. This means that the lender will compare the monthly EMI calculation to the monthly income to assess how easily the borrower can pay off the debt. A lower debt-to-income ratio shows that the applicant can pay off the debt easily.
- Business plan: Personal loans don’t ask for a business plan. However, some lenders can ask for a detailed business plan to assess the viability of the business and then judge repayment capacity.
The documents required for a ₹25 Lakh business loan is minimal. Have a look at the common documents asked for a small business loan:
- Personal ID Proof
- Business proof
- Financial and tax documents including ITR and profit and loss statements
- MSME registration/Udyam registration (when applicable)
Comparing lenders for ₹25 lakh business loan
Comparing lenders for ₹25 lakh business loan would mean that you will be comparing lenders who are providing small business loans like working capital loans. Have a look at few small business loan interest rates from major financial institutions in India:
- Tata Capital MSME/SME loan interest rate: 15% p.a. onwards
- State Bank of India (SBI) MSME loan interest rate: 9.65% p.a. onwards
- HDFC Bank Business loan interest rate: 15.75% p.a.
- PNB MSME loan interest rate: 9.60% p.a. onwards
- Bank of India MSME loan interest rate: 9.10% p.a. onwards
- Indian Bank MSME loan interest rate: 10.15% p.a. onwards
- Union Bank MSME loan interest rate: 9.05% p.a. onwards
Interest rates are subject to change and therefore it is recommended that you contact the lending institutions to find out accurate interest rates.
How to get a ₹25 Lakh business loan?
Finding the right ₹25 Lakh business loan lender can be easily done online. You can type in 25 lakh business loan SBI, 25 lakh business loan HDFC, etc., on the Google search bar to get an insight into the loan products each lender offers.
You can also check for online lending platforms that can give you small business loans. Online lending platforms have relaxed eligibility requirements compared to banks and other major lending institutions. You can easily get small business loans and even personal loans for business needs from these lenders with minimal documentation and a simple application process. Online lenders can also offer you customised solutions for ₹25 Lakh business loans.
Also read: Business loan on degree certificate