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All You Need to Know about Business Loan in India

Published on Feb 13, 2020Updated on Jan 23, 2024

All You Need to Know about Business Loan in India

Running a business involves many different expenses. Each one of these generates returns at a different rate, and at different times. Therefore, the financing of these expenses should also be different.

If there is one place to do business in the world, it's India. India, with its large population and massive resources, offers a wonderful opportunity to build great businesses.

“If you're not going up, you're going down” – Grant Cardone

There are different types of business loans in India, each of which is applicable to a different type of business, may have a different set of business loan eligibility criteria, and has a specific purpose. To help make things simpler, we have tried to put together here for you a few basic types of business loans and their benefits.

1. Term Loans

Term Loans is where the lender disburses an amount of money upfront, and you return the amount, with interest, as per a predetermined repayment schedule.

A term loan is often conducive for small businesses with sound financial history. You may need a term loan for several reasons:

  • Acquiring fixed assets like machinery, equipment for its production processes
  • Purchasing commercial property or a new plant to increase or accelerate production.
  • Acquiring another company for expansion and diversification.
  • Providing working capital to meet daily expenses incurred in the normal functioning of/difference-between-term-and-demand-loan.aspx the company

2. Business Lines of Credit

Many businesses may require revolving credit, which gives access to a certain amount of funds that they may withdraw as and when they need instead of the entire amount being disbursed at once. The lender may agree on a preset maximum limit. You can withdraw any amount of money within this limit to meet current expenses and liabilities as and when required.

The built-in flexibility provides you access to a certain amount of funds without the obligation to withdraw the entire money at once. Hence you don’t feel overburdened with the obligation to repay vast amounts of money and pay interest only on the nominal amount withdrawn instead of the entire credit line.

Must Read: Avail a Business Loan to Expand into New Line of Business

Besides, you can repay the amounts as needed after taking the financial well-being of the company and the cash flow into consideration. You may repay the amounts in small batches or all at once as per your convenience.

3. Equipment Financing

Equipment Loans is a very lucrative proposition for business owners planning to buy machinery, equipment, or commercial vehicles. Here, the fixed asset itself acts as the collateral for the loan. Hence, equipment financing is a secured loan where the machinery, equipment, or vehicle need to be purchased is leased and serves as security. In the event of a failure in repayment, the amount is redeemed by selling the leased asset. This seems to be a perfect fit for someone who has vast debts or uncertain financial history who is facing difficulties in raising cash to finance the purchase of an asset.

4. Invoice Financing

Depending on your line of business, particularly if you are in manufacturing, you may need to provide attractive credit facility and payment terms to your clients where you expect to receive the payment after a long interval, probably 90 days or 180 days. However, you may be required to pay your suppliers immediately. Meanwhile, you will still need financing in order to ensure regular operations as well as for expansion. In such a case, you can use your receivables to get a loan, which is called invoice financing.

5. Commercial Real Estate Loans

Commercial Real Estate Loans is like Equipment Financing. However, Commercial Real Estate Loan is procured to buy commercial property like a production facility, shop, warehouse, etc. where the commercial property acts as the collateral. The commercial property itself secures the loan.

The principal constituent of any commercial loan is the Loan to Value. The Loan to Value is the loan offered vis-à-vis the market value of the commercial property. Generally, LTV usually is 75% to 80% of the market value of the property.

6. Micro Loans

You may need a minimal amount of money in the ordinary course of business. Microloans are generally unsecured loans with no need for collateral.

Business loans in India are rising steeply as more and more entrepreneurs want to be part of the India growth story. And for India to achieve the dream of a 5$ trillion economy, we at SMFG India Credit are doing everything we can by providing customized products for every dream.

At SMFG India Credit, we don't want any entrepreneur to feel burdened due to shortage of funds. Thus, we strive to provide business loans in India at competitive interest rates, so that you never feel your wings clipped in the journey towards building a great, long-lasting business. We ensure that we provide you the best offer as per your individual profile in terms of business loan interest rates, so you and your business continue growing. Our interest rates for business loans are minimal.

In the highly competitive market of India, businesses need to keep growing and evolving, at times to merely stay afloat. We recognize that an opportunity missed can be devastating, so we provide business loans in India at custom business loan interest rates and EMI's that's a perfect fit for you.

Must Read: How to Expand your Operations with Business Loan?

We are aware of how taxing it can be to go through lengthy procedures and tedious formalities. Hence, we have straightforward and transparent business loan eligibility criteria with very minimal documentation; so that you can get the funds you require to grab the opportunity staring at you. For a small business loan, the main criteria are that the applicant should be at least 25 years, and the age at maturity of the loan should be less than 65 years. For more details, please check our business loan eligibility page.

To simplify things, we have a business loan eligibility calculator that helps to calculate the amount of loan you're eligible for based on your net profit after tax.SMFG India Credit’s free of cost business loan eligibility calculator also enables you to adjust other criteria like monthly EMI, rate of interest, and tenure. However, the business loan calculator amount is merely indicative as it will additionally depend on the documents submitted, the financial well-being of the company, verification & examination by SMFG India Credit's team, and the organization’s policies at the time of the loan.

* Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG India Credit. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG India Credit's policy at the time of loan application. If you wish to know more about our products and services, please contact us

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