Business Loan for Digitising Businesses

As the country moves rapidly towards digitisation, online businesses are flourishing. Many small and mid-sized business owners have ambitious plans for growth but face challenges in securing the necessary financial resources. Adequate funding is vital for investing in inventory, technology, and marketing efforts to thrive in the competitive digital marketplace.

Business loans for online businesses offer a practical solution, bridging the gap between vision and financial constraints. With the right loan, entrepreneurs can scale operations, expand their market reach, and unlock their business’s full potential.

This article will guide you through the process of how to get a business loan for an online business. Follow along to gain a clear understanding of the eligibility criteria, necessary documentation, and application steps involved.

Benefits of Business Loans for Online Businesses

Here are some features and benefits that make business loans one of the best online business funding options:

• Flexibility in Repayment Tenures: Business loan tenures typically extend up to 48 months*, allowing for comfortable repayments aligned with your cash flow. Some lenders also allow prepayment with nominal charges. This flexibility gives you better control over your financial strategy.
• No Need for Collateral: Unsecured business loans free you from the need to pledge assets. This is a significant advantage for small online businesses that do not want to risk valuable personal or business assets.
• Competitive Interest Rates: Eligible businesses can often benefit from competitive interest rates on their loans, which helps reduce monthly repayments and the overall cost of the loan. This allows online businesses to manage cash flow more effectively, freeing up funds for other operational needs and ensuring smoother financial planning.
• Manage Loan Online: In line with the digital nature of online businesses, many lenders provide online account access. Entrepreneurs can track and manage their business loan accounts seamlessly across various devices like desktops, smartphones, or tablets. 

Loan Eligibility for Online Businesses

Basic Eligibility Criteria for Online Businesses

Lenders often have specific requirements when assessing loan eligibility for online businesses. These requirements typically include factors such as the length of time the business has been operating, its annual turnover, profitability, the age of the applicant, and the credit score. The exact thresholds for each criterion can vary from lender to lender.

Factors Affecting Business Loan Eligibility

Your eligibility for a business loan is influenced by a variety of factors, including:

• Nature of Business: Lenders often evaluate the industry in which your business operates, considering the risks associated with market demand, competition, and overall stability. Businesses that operate in higher-risk environments, such as those with intense competition, market volatility, or regulatory uncertainty, may face additional challenges when securing funding.
• Age and Financial Health of Your Business: Typically, your business should have been operational for a minimum of 3 years with a track record of stable income and profitability.
• Credit Score: A minimum CIBIL score of 750 is usually essential, as it signifies sound financial management and a low risk of default. A higher score increases your chances of approval and may help secure better loan terms.
• Existing Debt Obligations: The amount of existing debt you carry can impact your eligibility. Lenders assess your current debt obligations to determine your ability to manage additional loan repayments without compromising your business’s financial health.
• Positive Cash Flow: Demonstrating a positive cash flow is crucial, as it signifies your business's ability to generate sufficient revenue to cover operating costs and loan repayments. Lenders look for consistent and reliable cash flow to assess repayment capacity.

Documents Required for Online Business Loan Applications

Commonly required documents include:

• Identification Proof: Valid ID proof and PAN card for company, firm, or individual.
• Address Proof: Documents like voter ID, passport, driving licence, or ration card.
• Bank Statements: Bank statements for the past six months.
• Financial Documents: Income Tax Returns (ITR) for the last two years, along with the computation of income, balance sheet and profit and loss account for the past two years (certified by a Chartered Accountant).
• Proof of Business Continuity: Documents like recent ITR, Trade licence, Sales Tax Certificate, or Establishment Certificate.

*Please note that the above list is not exhaustive. Additional documents may be required depending on your individual profile and lender’s policy at the time of loan application.

Online Business Loan Application Process

A typical online or e-commerce business loan application process can involve the following steps:

1. Determine Loan Amount and Purpose: Clearly define the amount of funds required and the specific purpose for which the loan will be utilised. This clarity will help in selecting the most suitable loan product (e.g., working capital loan, term loan, etc.).
2. Research Lenders: Conduct thorough research to identify lenders offering terms that best match your requirements and repayment capacity.
3. Check Eligibility and Gather Documents: Assess your business's eligibility based on the lender's criteria and ensure all the required documents are readily available.
4. Submit Application and Wait for Approval: Complete the online application form, ensuring that all information is accurate, and upload the necessary documents. Once submitted, the lender will evaluate the application. 
5. Review Loan Offer: If approved, you’ll receive a customised loan offer. Carefully review the loan amount, interest rate, repayment terms, and associated charges, such as processing fees. If you’re satisfied, accept the offer, and the lender will disburse the funds to your account.

Conclusion 

Business loans can provide the necessary funding for online businesses to grow and compete effectively. With careful planning and preparation, online entrepreneurs can confidently approach lenders to secure the financial support needed to achieve their business goals.

SMFG India Credit offers tailored business loan solutions designed to meet the needs of enterprises with at least three years of operational history. Eligible businesses can apply online for collateral-free loans of up to INR 75 lakhs* at attractive interest rates. Check your eligibility today and take the next step toward achieving your business aspirations.