Personal Loan for Businessmen

A personal loan for businessmen is a loan that covers businessmen’s professional and personal financial challenges. Businesses can be uncertain and volatile in unexpected losses and crunch situations. This is when personal loans for businessmen offer a solid cushion to keep the business thriving while taking care of the business owner’s needs. 

Personal loan for businessmen is easily accessible. It offers great flexibility, high loan amounts and low collateral requirements, among other benefits. It ensures that the businessmen are unbothered by personal financial challenges and can focus on expanding their business. 

Comparison of Personal Loan Offerings for Businessmen

Different banks offer personal loans to businessmen at different interest rates. The comparative guide below details the specifics of business owner personal loans provided by different loan providers. It can help you choose the best loan option from various choices.

Eligibility Criteria

Personal loan eligibility for businessmen focuses on establishing the applicant’s debt repayment capacity. These criteria differ from bank to bank. Some common eligibility criteria are listed below –

• Minimum Income: Banks specify minimum income levels for salaried and self-employed individuals. This specification varies not only from bank to bank but also from location to location in some cases. Producing financial documents highlighting the applicant’s financial stability can help ease the loan approval process.
• Age Requirements: Banks specify age brackets within which personal loans are extended to businessmen and self-employed individuals. While 21-23 years is usually the minimum age to apply for a business owner personal loan, it can go up to 65-70 years as the maximum age.
• Credit Score: A minimum credit score of 685 or higher is needed to sanction the loan successfully. The credit score represents the borrower’s credit history and credit repayment abilities. A good credit score helps an applicant secure the loan provider’s trust. The credit score requirements to apply for an entrepreneur’s personal loan may differ from bank to bank. 
• Citizenship: Personal loans are extended only to businessmen having Indian citizenship. 
• Business Age: Banks look for businesses showcasing continuity and consistency of operations. While it may vary from bank to bank, several banks prefer sanctioning a personal loan to businessmen operating their current business for at least two years. Furthermore, banks also aim to establish the business’s health by analysing its financial statements.

Required Documents

Apart from the duly filled loan application form, the following documents must be produced for a personal loan application for business.

While most banks require photocopies of the asked documents, you may also carry original copies along with you to be on the safer side.  

Fees and Charges for a Personal Loan for Businessmen

Banks charge different fees for offering personal loan services to business owners. While these charges may vary from bank to bank, some common charges applicable to personal loans are listed below. 

• Processing Fee: The processing fee ranges from 1%-3% of the loan amount. Banks may also charge an additional GST over the processing fee. Banks levy a processing fee to recover certain administrative costs incurred while processing and sanctioning a personal loan request.
• Penal charges: Penal charge is a form of penalty imposed by the bank in case the borrower fails to deliver one or more EMIs as per the loan repayment schedule. These charges vary as per the terms and conditions of the loan provider.
• Pre-payment/Foreclosure charges: The bank suffers losses if the borrower repays the loan in part or full before the end of the debt’s tenure. To compensate for this loss, the bank may charge the borrower a 2%-4% pre-payment charge.
• Verification Charges: The charges incurred by the bank while verifying the documents submitted by the applicant are referred to as verification charges. Loan providers often avail the services of third-party agencies to verify an applicant’s creditworthiness. It recovers the cost of this verification from the borrower through verification charges. 
• Duplicate Statement Fee: You can obtain a duplicate copy of your loan repayment schedule or the current loan balance from the bank by paying a nominal fee specified by the bank. 
• Stamp Duty: A loan agreement becomes a legal document through stamp duty. Therefore, banks charge stamp duty on personal loans to comply with the Indian Stamp Act. Usually, a stamp duty of 0.1% is charged over loan amounts less than ten lakh rupees and 0.2% for every ten thousand rupees after that.
• GST: Banks charge a GST of 18% on all bank services. It is important to note that the GST is not charged on the interest but on the processing fee, prepayment fee and other such services. 

Features and Benefits of Personal Loans for Businessmen

Personal loans for business owners offer several significant advantages. Some of the prominent ones are listed below.

Loan Amount: The personal loan amount for a businessman ranges from Rs 50,000 to Rs 50 lakhs. The loan duration can range from 1-6 years, with the interest rates varying between 10.5% to 24% per annum.  

Business Expansion: An Entrepreneur’s personal loan is a vital tool to strengthen their business. When all the personal expenses of a businessman are provided for, they can be unbothered and focus their energies solely on their business. Therefore, it becomes a solid aid in business growth and expansion. 

Beneficial for newly started ventures: Personal loans for business people extend financial support against the creditworthiness and personal income of the businessman and not the company. Therefore, personal loans can be a readily available aid for newly started businesses that may need more robust growth reports to produce.

Flexibility: Businessman personal financing offers financial flexibility in several ways. Firstly, a range of amounts can be raised from this loan at different interest rates, varying from bank to bank. Furthermore, these loans can be used for personal and business purposes, offering wide financial coverage. 

Personal Expenses: Personal loans for business owners cover a range of personal expenses. Personal loans can be used for all kinds of financial obligations, from buying a new house to renovating an existing one, planning a family vacation, covering wedding expenses, medical costs, and purchasing new gadgets and vehicles. 

Collateral-free: These are unsecured loans where most banks do not require the submission of collateral or security from the applicant. They are offered against the borrower’s own creditworthiness. Therefore, while the collateral requirements are minimised, maintaining a good credit score becomes an important prerequisite for this type of loan.

Flexible Repayment Options: The loan amount is most widely repaid using a scheduled process called Equated Monthly Installments (EMIs). These instalments include the principal amount and the interest and must be paid regularly to settle the loan. Banks also offer pre-payment and foreclosure options to allow the borrower to repay the loan amount earlier than specified dates. Loan repayments can be made via the bank’s website or mobile application. Further, EMI payments to your bank can be easily scheduled for automatic transfer every month from your account to your bank through e-wallet applications. 

Quick Approval: Unlike a business loan, a personal loan application for a businessman is easily approved with minimal documentation. The loan amount is generally granted within minutes of approval, providing a quick and hassle-free financial solution.

How to Apply for a Personal Loan for Businessmen?

Personal loans can be obtained offline by visiting a bank’s branch or online, such as through the bank’s website or mobile application. Apart from this, NBFCs also offer personal loans to businessmen. 

Online Application: 

The following steps can be followed to apply for an entrepreneur’s personal loan using a bank’s website or mobile application.

Through Website:  

1. Log onto the bank’s official website.
2. Choose a personal loan from the Loan/Borrowings section
3. Choose the correct option from Salaried employee/ Self-employed.
4. Fill in the details such as PAN details, Aadhar details, and mobile numbers, among others required by the portal.
5. Some banks may require you to create an online account on their website before proceeding with the loan application. You can easily make an account by filling in the required details.
6. Verify the OTP sent by the bank on the mobile number provided by you.
7. Upload the necessary KYC documents to be verified by the bank.
8. the bank will notify you on your mobile number or e-mail address after verifying your documents. 
9. Once the documents are verified, the loan will be sanctioned within 1-5 working days of approval and credited to your bank account. 

Sometimes, the banks also allow their clients to apply for loans online while offering doorstep verification of documents. After the online application is complete, a bank representative comes to verify the documents at the convenience of your home and further the loan approval process.

Mobile Apps: 

Generally, mobile applications offer personal loans to existing customers only. Hence, a pre-approved loan can be applied for using the mobile application. 

1. Download your bank’s mobile application.
2. Log in using your credentials.
3. Look for the ‘Loans’ category.
4. Choose to apply for a personal loan.
5. Choose the desired loan after checking your eligibility 
6. Fill in the required details and complete the document verification process
7. Enter the OTP sent on your registered mobile number and apply.
8. Once the loan amount is disbursed, you will be notified via sms on the registered mobile number or through an email on the registered e-mail address. 

Offline Application: 

You can visit the bank’s nearest branch, where the representatives can guide you through the various kinds of loans available and help you through the application process. Visiting the branch offers a one-on-one interaction and helps instantly clarify any doubts. 

NBFCs

If you are unable to apply for a personal loan from a bank, Non-Banking Financial Companies can digitally offer loans through their apps and websites. Applying for loans through digital lending applications provides easily accessible and instantly disbursed loans. However, while applying for a personal loan through NBFCs, one must be careful of the levied charges and digital privacy policies and look for the key fact statement to be offered by the company. Kreditbee, Paysense, NAVI and Lazypay are some popular NBFC options. 

Tips for Choosing The Right Personal Loans for Businessmen

Know your requirements: Every loan is a debt that needs to be repaid within the pre-decided tenure along with the specified interest. Therefore, one must carefully ascertain loan requirements and apply for the appropriate loan amounts well within one’s repayment capacity. It is also helpful to check out the loan offers of different banks, compare them with one another and make the best choice for yourself. 

Pre-approved loans: If you are already a customer, banks can offer you pre-approved personal loans. Since banks already have your verified information in their database, pre-approved loans require minimum documentation. This can save time and effort and provide almost immediate access to the loan amount. 

Digital Loan Management:  You can use online loan accounts to seamlessly access your loan details and regulate EMI payments as per your preference. 

Keep the documents handy:  The documents required by the bank must be properly maintained in one place to avoid any last-minute confusion and misplacement. The document requirements of a bank can be easily accessed through its website, helpline number or by visiting your nearest branch. 

Check Eligibility: It is important to check if you’re eligible for the loan you’re applying for. You may visit your bank’s nearest branch to get a comprehensive understanding of the loan and the maximum amount of loan the bank is willing to grant you before making a decision. Banks also provide online loan eligibility calculators through which you can get a list of the available loan options within minutes. 

Conclusion

An Entrepreneur’s Personal Loan is an all-encompassing financial aid for business owners and self-employed individuals. With ease of access, quick approval and flexible usage, the loan can be secured without pledging any asset against the borrowed amount. Personal loans allow businessmen to raise an amount ranging from Rs 50,000 to Rs 50 lakhs which can either be invested in the business or be used for their personal needs. If a business owner fails to meet a bank’s criteria to access a personal loan, it can easily be applied for through NBFCs. Among several other features and benefits, easy repayment options make the Personal Loan for Businessmen a great personal loan choice.