- August 27, 2022
- Posted by: admin
- Categories: Business Loan, Loans
Business Loan is an Unsecured Loan Which is Lent to a Person Who is Self-employed or He Earns His Livelihood With Income Generated by His Business. Some People Think That It’s the Loan for the Purpose of Investment in Business. Its Not So. The Amount of Business Loan Can Be Used for Any Purpose Ranging From Working Capital to Marriage, Sports or Foreign Tour Etc.
How is Business Loan Different From Personal Loan?
Business Loan and Personal Loan Both Are Unsecured Loans. The Only Difference is That Personal Loan is Given to the Salaried Persons and Business Loan to Business Persons. Both Are Used as an Emergency Fund for Variety of Needs.
What are types of Business loan?
Business Loan is Generally a Term Loan Ranging From 1 Year to 5 Years Tenure. It is Sanctioned to the Person Who Earns His Livelihood From Business or Self-employment. You Need to Furnish Your Income Tax Return of Last Two Years Along With Details of Current Acct With Average Bank Balance and Gst Returns(if Applicable).
Business Loan Over Draft (BLOD)
However, There is Also a Kind of Business Loan Which is Known as Business Loan Over Draft (Blod). It is Similar to Business Loan in Terms of Eligibility. It is a Type of Over Draft Facility in Which Business Persons Are Authorised to Withdraw Any Amount Up to Sanctioned Limit and Repay It as and When They Have Surplus Amount. The Interest Will Be Charged for the Period Between Withdrawal Date and Repayment Date. Even It Can Be Repaid in Any Part. Generally, Its Max Tenure is 7 Years. A Few Banks Provide Large Amount of Blod on Mortgage of Property. Blod is Most Suited to the Business in Which Short Term Running Capital is Required Frequently.
Benefits of Business Loan
Business Loan is a Kind of Loan Which Can Be Availed Within Shortest Possible Time. In Some Cases, It Can Be Disbursed Within a Day and Smaller Amount of Business Loans Can Be Disbursed Within an Hour Too. So, Whenever There is a Requirement of Fund and Reaction Time is Less, Then It’s the Most Suitable Type of Loan for Self-employed and Business Persons.
Business Loan is Unsecured Loan. Hence You Do Not Need to Mortgage Your Asset With the Lender. It Reduces Processing Time Considerably. However, It Involves Little More Amount of Risk of Default. Hence, Its Rate of Interest is Little Higher Than Secured Loans. As Also Better Cibil Score is Needed to Hedge Additional Risk Involved in It.
Tenure of Business Loan is Up to 5 Years. Some Lenders Extend Max Tenure to 7 Years. It Gives Enough Tenure to Customers So That They Could Repay It Without Compromising With Their Routine Household Expenditures. It Also Makes Sure That Loan is Repaid Well in Time and if Needed, Option of Balance Transfer is Also Available in Which Another Lender Will Not Only Take Over Balance Loan Amount but Also It Will Provide Additional Amount Depending Upon Repayment Capacity of the Customer.
How to Make Sure Best Rate of Interest in Loan?
Business Loan is an Unsecured Loan. Hence Lenders Expect Customer to Maintain His Credit Score to 750 or Above. The More is the Credit Score, the Less Will Be the Interest Rate. Another Very Important Factor is to Maintain Bank Transaction Very Healthy. Even if Customer Earns His Livelihood by Cash in Majority, He Must Deposit It to His Bank Account and Maintain All the Transaction in His Account. Along With It He Should Always Declare His Correct Income in His Income Tax Returns. It Will Benefit Him Immense to Avail Optimum Amount of Loan. Lenders Do Not Recognise Any Income Which is Not the Part of Tax Return and Dealt With Cash Only.
If You Are a businessperson or Earn Your Livelihood by Self-employment and You Keep All Above Points in Your Mind, All the Prime Lenders Will Be After You to Offer Optimum Amount of Business Loan With Best Rate of Interest.