Smooth running of business requires funds at regular intervals. Requirement may be big or small and accordingly an applicant avails loan to cater to his business needs.
Availing a business loan is easy and convenient and can be applied for at anytime of the day. If the business loan is supported by the collateral it becomes easier with for the lender to lend to the borrower.
Various lenders offer business loans at varied interest rates. Before applying for the business loan one should compare the interest rates, processing fees and other charges with the available lenders in the market.
Business loans are available at interest rates which can be of two types—Flat rate of interest and Reducing rate of interest:
Flat rate of interest –For example : A loan amount is availed by an applicant of Rs 1,00,000 at a flat rate of interest at 10% p.a for a tenure of 5 years. He will have to pay Rs 20,000 which is the principal repayment for the amount of (1,00,000/5) + Rs 10,000—interest at 10% of this 1,00,000 is equal to a total of Rs 30,000 per year. Over the tenure of the loan, the borrower will end up paying Rs 1,50,000 that is (2,500*12*5).
Reducing rate of interest - The interest calculation for the following month is done on the outstanding amount of loan. The EMI comprises interest rate which is payable for outstanding amount of loan for each month with the principal of repayment. The loan amount gets reduced, after each monthly installment. It is calculated each month on the remaining loan amount.
An applicant business loan should be falling under the below mentioned criteria:
Must be of age between 21-65 years of age.
Must be a self-employed professional having a business stability of 1 year or a self-employed businessman having 2 years of business stability.
Must be having a CIBIL score of 750 and above.
Must be a self-employed non-professional in the business of manufacturing, trading, and services, sole proprietorship firms, private limited companies./ Must be a self-employed professional of CA, CS, Doctors, Architects.
Loan amount applied for must be between Rs 1 lakh to Rs 1 crore.
Let us understand what are the factors affecting credit score –
Credit Score - A good credit score creates a positive impact in the eyes of the lender. A credit score determines the creditworthiness of the applicant. if the credit score is a healthy one i.e above 750. An applicant can get the business loan at better interest rates with additional features.
Business Existence - A business should have an existence of minimum of 1 years. The longer tenure of business establishes; it is not a risk profile and create a sense of belief in the eyes of the lender. The prospect of availing a business loan.
Collateral - Availing a business loan by providing collateral has benefits of getting a concession on the business loan interest rates. Collateral is a security against which the applicant avails the loan. Higher the value of the pledged collateral, the more can be the benefits. Pledging the collateral ensures that the loan application will be less risky.
Business Turnover -The turnover decides if your business is making a profit or running in loss. The lender can determine the repaying capacity of the debt of loan, by the turnover of the business. The integration of technology into the financial sphere has resulted into a more easier and quicker availability of loan to borrowers also at affordable interest rates.
Nature of business - Businesses falling under the non-priority sector are granted at higher rate of interest than the priority sector. Businesses are classified into priority sector and non-priority sector. Applicants can compare the rates of different lenders online and evaluate on the basis of their repaying capacity, which are the potential lenders for their business.
An applicant must make every possible attempt to fulfil the eligibility criteria to avail best business loan to support their business.
SBI e-Mudra loan offers business loan to Micro, Small and Medium Enterprises(MSMEs) under the guidance of the Micro-Units Development and Refinance Agency(MUDRA). SBI offers mudra loan at affordable interest rates to meet various requirements that include capacity expansion, modernization, buying machinery, business expansion, and business related purpose. The loan is offered to business enterprises in services, manufacturing and trading sectors.
SBI Mudra Loan 2020
Loan AmountUp to Rs 10 lakh Interest Rate10.50%Eligibility CriteriaExisting and New UnitsPre-Payment ChargesBetween 3-5 years(moratorium of upto 6 months) depending on the activity/income generationMarginUp to Rs 50,000 Nil and From Rs 50,001 to Rs 10 lakh is 10%Residence StatusFor last 2 years, residing in same societyCollateral SecurityNilNationalityIndian
Types of E-Mudra Loan
Shishu Loan – The loan amount is up to Rs 50,000 and there are no processing charges. It is aimed to meet the needs of micro units and small business owners get started with their business.
Kishor Loan – SBI provides a loan of Rs 50,000 to Rs 5 lakh under this category. The borrowers must provide the necessary documentary evidence to show the status of the business when they submit the application for the Kishor loan.
Tarun Loan – This SBI Mudra loan is given to businesses that need the larger funding to grow and/or establish their businesses.
Borrowers financed under Mudra Loan are provided with RUPAY Debit cards named Mudra Card for cash withdrawals and Pos Transactions under 3 categories named as Shishu, Kishor and Tarun.
Limit Shishu Kishor Tarun Daily Cash withdrawals10,000 15,000 20,000Daily
POS Limit15,000 25,000 30,000
SBI e-Mudra Loan Eligibility
For loan amount above Rs 50,000 applicant needs to visit SBI’ nearest bank branch for loan formalities.
Loan availability of Rs 50,000 as per directive of norm
Maximum loan amount offered is Rs 1 lakh
Maximum repayment period is up to 5 years
Applicant must have account with SBI account for atleast 6 months
Applicant must be a micro-entrepreneur
SBI Mudra Loan Eligibility -
The applicant should be residing at the same location for atleast 2 years.
Applicant must be engaged in a non-farm income generating activity, either in manufacturing or in the services sector.
Applicant should not have defaulted on any loan availed earlier from any financial institution.
Tenure for SBI Mudra Loan Tenure – The purpose for which the financing is provided by the bank decided the tenure of the loan. SBI Mudra loan is repayable on demand if it was provided for working capital requirements (fund-based). For term loan and other business purposes, the SBI Mudra loan has a repayment period of 3-5 years, including the moratorium of up to 6 months given by the bank to the borrower.