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Self-employed business owners often find it difficult to fulfil the financial needs of their business. Banks and NBFCs have various schemes for the self-employed. This article takes a closer look at what a self-employed business loan is, who falls under the category of self-employed, what eligibility criteria are, how to apply and so on.

What is a business loan for the self-employed?

A business loan for self-employed is a loan for self-employed professionals and business owners. Self-employed can be professionals or non-professionals. Such a loan fulfils various financial needs of self-employed people. Here is a list of purposes for which a self-employed loan can be obtained:

  • Building working capital
  • Business expansion
  • Purchase of raw material
  • Other short-term business financial need
Who is self-employed?
Examples of self-employed professionals are doctors, chartered accountants, architects, photographers, dieticians, consultants, and so on
Examples of self-employed non-professionals are such as traders, contractors, commission agents, manufacturers, real estate agents, event planners, etc.

 

Business loan for self-employed: Who is eligible?

Although the eligibility criteria for eligibility of a self-employed business loan differs for each financial institution, here are some of the common factors for consideration.

  • Age of self-employed: The age criteria for obtaining a business loan for self-employed is 22-65 years.
  • Type of companies: All self-employed individuals, proprietors private limited companies, partnership firms, limited liability partnerships, etc. can avail of the self-employed business loan.
  • Business vintage: Many financial institutes require a business vintage of 3 years.
  • Creditworthiness: You need to have a high CIBIL score of 700 and plus.

Documents required for self-employed business loans

Although the list of documents required by each bank or NBFC may vary, here are some of the commonly required documents for self-employed business loans.

  • Duly filled application form and 2 passport size photos
  • KYC documents such as Aadhaar card, Passport, PAN card, Voter’s ID, driving license, etc.
  • PAN card of the business
  • Business registration or GST registration
  • Address proof of the business such as utility bills,
  • Proof of business vintage such as an Incorporation Certificate
  • Bank statement of last 6-12 months
  • Business or company’s Income Tax Returns for the past year
  • Business plan
  • Any other document in case the lender asks

Note: The required documents change as per the lender, therefore it is best to get an exhaustive list of the required documents.

Also read: Business loan on degree certificate

Self-employed business loan: Interest rates

Interest rates of self-employed business loans vary according to each lender’s policy. Here is a list of interest rates charges by various financial institutions.

Bank/NBFC Interest rate
HDFC Bank 10% to 22.5%
Axis Bank 11.95% – 21.20% p.a.
Bajaj Finserv 12-30%
SBI Bank 9.50% onwards
IDFC Bank 10% onwards
Tata Capital 12% onwards

Note: Please note that the rate of interest changes periodically, hence it is best to get the latest information about interest rates from the bank.

How to apply online?

Here is how you can apply online for a business loan for self-employed.

  • Visit your preferred bank or NBFC’s website and click on ‘Apply now’. You can also use your existing bank’s app to apply.
  • The application form will appear. Input all the required details. (Some banks may ask you to share your contact details and a loan executive will get in touch with you.)
  • Upload required documents.
  • While some banks/NBFCs respond to your request within a few hours with an in-principal approval for your loan, some financial institutions might take 3-4 working days to scrutinise your documents before contacting you.
Tata nexarc also offers a business loan for self-employed at attractive interest rates while the application process is simple and hassle-free. You can just visit the Tata nexarc Business Loans page click on ‘Apply now’, and upload your documents such as KYC documents, bank statements for 12 months and business proof. You will get loan offers from multiple financial institutions. Compare offers and select the best one.
  • Once your loan is approved, the loan executive will explain further process of disbursement. You may have to visit the loan centre to complete formalities and sign the loan agreement.
  • Your loan will be disbursed. It generally takes about 5-7 working days for loan disbursal.

Alternatively, you can also visit the nearest branch to apply for a self-employed business loan offline.

Business loan for self-employed: Things to keep in mind

  • Before applying for a loan, read the eligibility criteria carefully. In case of non-compliance with the eligibility criteria, you will face loan rejection, which will impact your CIBIL score.
  • Know your CIBIL score before applying. In case your CIBIL score is lower than the requirement, work towards improving it.
  • If you are applying for a self-employed business loan online, be aware of loan scams. Learn to differentiate between fake and genuine calls from the bank.
  • For a hassle-free loan approval process, know the list of required documents. Gather digital copies of all documents in the required formats such as .pdf, .exl, .jpg, etc.

Alternative funding options for self-employed loan

In case it is challenging for you to obtain a business loan due to not meeting eligibility criteria or a lower CIBIL score, you can still raise funds for your business activities through the following alternative options.

  • Government schemes: The government of India encourages micro and small businesses and has a few government loan schemes for the self-employed. Look for a suitable scheme and apply for the same. One of the main benefit of availing a government scheme is
  • Credit card loan: You may be eligible for a credit card loan in case you already have a credit card. Basis on the payment history and credit card usage, many banks extend pre-approved loans through your credit card.
  • Personal loan: You can also consider availing personal loan for business purposes. The personal loan is approved on the basis of your personal credit score and payment histories.
  • Overdraft facility: You can check with your bank about the overdraft facility. Many banks allow you to withdraw more money than your account balance. You can check the rate of interest, overdraft limit, etc., with your bank.

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Swati Deshpande

Swati is a passionate content writer with more than 10 years of experience crafting content for the business and manufacturing sectors, and helping MSMEs (Micro, Small and Medium Enterprises) navigate complexities in steel procurement, and business services. Her clear and informative writing empowers MSMEs to make informed decisions and thrive in the competitive landscape.