Securing an Online Business Loan: A Step-by-Step Guide

Understanding Online Business Loans

An online business loan is a type of financing provided by banks, non-banking financial companies (NBFCs), and fintech lenders through digital platforms. These loans are tailored for businesses and can be availed quickly with minimal documentation compared to traditional loans. The primary advantage of online business loan is the convenience of applying from anywhere and receiving quick approvals and disbursals.

Benefits of Online Business Loans

1. Convenience: You can apply for a loan from the comfort of your home or office without visiting a bank branch.
2. Quick Processing: Online applications are processed faster, often resulting in approvals and disbursals within a few days.
3. Minimal Documentation: Online lenders typically require fewer documents, simplifying the application process.
4. Flexible Loan Amounts: Borrowers can apply for varying loan amounts based on their business needs.
5. Transparency: Online platforms provide clear information about interest rates, fees, and terms, allowing borrowers to make informed decisions.

Eligibility Criteria for Online Business Loans

Eligibility criteria for online business loans may vary between lenders, but the following are the general requirements:

1. Business Vintage: Most lenders require the business to be operational for at least one to three years.
2. Revenue: A minimum annual revenue threshold, often ranging from ₹10 lakhs to ₹50 lakhs, depending on the lender.
3. Credit Score: A good credit score (typically 650 and above) improves the chances of loan approval and better interest rates.
4. Business Registration: The business should be registered as a sole proprietorship, partnership, private limited company, or limited liability partnership (LLP).
5. Income Tax Returns: Submission of income tax returns for the past one to two years.

Documents Required for Online Business Loans

1. Proof of Identity: Aadhar card, PAN card, passport, voter ID, or driving license of the business owner(s).
2. Proof of Address: Utility bills, rental agreement, or property tax receipt.
3. Business Registration Proof: Certificate of incorporation, partnership deed, or GST registration certificate.
4. Financial Documents: Bank statements for the last six months, profit and loss statements, balance sheets, and income tax returns.
5. KYC Documents: KYC documents of the business and the business owner(s).

Steps to Apply for an Online Business Loan

1. Research and Compare Lenders: Begin by researching and comparing different online lenders. Look for those offering competitive interest rates, flexible terms, and favorable eligibility criteria.
2. Check Eligibility: Use online eligibility calculators available on lender websites to check your eligibility for the loan amount you require.
3. Gather Documents: Ensure all necessary documents are in order and up-to-date. This includes identity proofs, address proofs, financial statements, and business registration documents.
4. Fill Out the Application: Visit the lender’s website and fill out the online application form with accurate details about your business, financials, and the loan amount required.
5. Upload Documents: Upload the required documents as per the lender’s guidelines. Ensure the documents are clear and legible.
6. Submit the Application: Review the application for accuracy and submit it online. Most platforms provide an acknowledgment receipt and a reference number for tracking your application.
7. Verification and Approval: The lender will verify the information and documents provided. This process may involve checking your credit score and business financials.
8. Loan Disbursal: Upon approval, the loan amount will be disbursed to your bank account. Some lenders may require you to sign a loan agreement digitally before disbursal.

Tips for Successful Loan Approval

1. Maintain a Good Credit Score: Regularly check your credit score and take steps to improve it. Pay off existing debts and ensure timely payment of bills and EMIs.
2. Accurate Financial Records: Keep accurate and up-to-date financial records. Transparent financial statements increase your credibility and improve loan approval chances.
3. Clear Business Plan: Prepare a clear business plan outlining how the loan will be utilized and the expected return on investment. This demonstrates your preparedness and seriousness to lenders.
4. Reduce Existing Debt: Lower your existing debt levels to improve your debt-to-income ratio, making you a less risky borrower.
5. Choose the Right Loan Amount and Tenure: Opt for a loan amount and repayment tenure that align with your repayment capacity without straining your finances.
6. Timely Application: Apply for the loan well in advance of your financial needs to ensure timely access to funds.

Interest Rates and Charges

Interest rates for online business loans vary based on the lender, loan amount, and borrower’s creditworthiness. Typically, interest rates range from 12% to 24% per annum. In addition to interest rates, borrowers should be aware of other charges such as:

1. Processing Fees: Usually 1-3% of the loan amount.
2. Prepayment Charges: Applicable if you decide to repay the loan before the end of the tenure.
3. Late Payment Fees: Charges levied for late EMI payments.
4. Other Miscellaneous Fees: Legal charges, stamp duty, or service charges as specified by the lender.

Popular Online Lenders for Business Loans in India

1. Lendingkart: Known for quick disbursals and minimal documentation. Interest rates range from 12% to 24% per annum.
2. Indifi: Offers tailored business loans with flexible terms. Interest rates start from 18% per annum.
3. FlexiLoans: Provides unsecured business loans with interest rates ranging from 16% to 24% per annum.
4. Capital Float: Specializes in digital lending with competitive rates starting from 13% per annum.
5. NeoGrowth: Offers loans based on credit card sales with interest rates starting from 18% per annum.

Conclusion

Apply online business loan in India has become an efficient and accessible process for entrepreneurs and business owners. By understanding the eligibility criteria, gathering the necessary documents, and following the correct application steps, you can secure the funding needed to grow and manage your business effectively.

Remember to compare different lenders, maintain accurate financial records, and improve your credit score to enhance your chances of approval and secure the best interest rates. With careful planning and responsible borrowing, an online business loan can provide the financial boost your business needs to thrive.