Finance is the lifeblood of business. Every business needs an adequate level of finance to survive, operate and grow. Business loans provide financial assistance to organizations to grow and expand by financing equipment, working capital needs or purchasing hardware to support the business.
Different types:
1. Overdrafts
As the name suggests, an overdraft means an overdraft from your current account. You will be charged the agreed interest rate for this office. If you don’t overdraw your account, you won’t be charged any interest.
2. Term loans
Term loans can be profited here and now, long-term or medium-term. Term loans are of two types, unsecured business loans and secured business advances. A secured business loan requires you to pledge a guarantee with the bank, while an unsecured business advance does not require any collateral/insurance. Secured business advances have reduced funding costs compared to unsecured business loans.
Bill reduction is an instant refund technique. You must introduce drafts that will be collected for an amount less than the draft. The difference is retained by the bank as a reduction in fees. You should submit the necessary records such as applications, shipping confirmations, etc. that approve trade exchanges.
Letter of credit:
The confirmation letter is otherwise called LC. An LC is a confirmation issued by the buyer’s bank declaring that the buyer will honor the installment when the merchant brokers the goods and conducts business in accordance with the wording and conditions of the offer. LC is largely used as part of a universal business.
Mudra Yojana:
Mudra Yojana is a business loan scheme launched by the government for small and medium enterprises in India. Government provides funds to banks and banks in turn finance businesses in India. So banks offer MUDRA loans at a lower interest rate compared to standard business loans.
Eligibility Criteria:
1. Who is entitled to use?
– Self-employed entrepreneurs or professionals
– Limited liability companies or private limited liability companies
– Manufacturer, seller or service providers
Tutorial Video
2. Criteria
Applicant must be between 21 and 65 years of age.
– The business should exist for at least 3 years.
– The business should show profits for the last 2 years.
– Turnover must be at least Rs 40-50 million per annum.
– Minimum profit must be 1-2 Lakhs.
Required documents:
– Last 3 years of ITR
– Bank statements
– Business proof
– Certificate of practice
– Current photograph of the applicant
– Proof of Identity: Aadhar Card, Voter ID Card, PAN Card, Company Registration Certificate etc.
– Proof of residence
– Other documents such as Declaration of Sole Proprietorship, Certified Copy of Partnership Agreement, Certified Copy of Memorandum of Association and Bylaws.
Term loans can be profited here and now, long-term or medium-term. Term loans are of two types, unsecured business loans and secured business advances. A secured business loan requires you to pledge a guarantee with the bank, while an unsecured business advance does not require any collateral/insurance. Secured business advances have reduced funding costs compared to unsecured business loans.