+91 7304447444 Connect to our virtual assistant
YouGrowWeGrow
banner banner

Stay Up-to-Date with Our Blogs & Articles

The texts on this website have been translated using an automated translation tool and its accuracy cannot be guaranteed. We recommend referring to the English version of the content for the most precise information. In the event of any disputes or inconsistencies, the contents in the English language shall be considered final and binding. IIFL HFL disclaims any liability or responsibility in this matter.

Go Back to Main blog page

Different Types of Business Loans in India

Published On Aug 12 2024 6:13 AM 1 min read 19 views 3743 Likes
Different Types of Business Loans in India

In the dynamic economic landscape of India, businesses often require financial assistance to start, sustain, or expand their operations. This need has given rise to various types of business loans, each catering to specific requirements and circumstances. Here, we explore the different types of business loans in India, helping business owners make informed decisions to fuel their ventures.

Types of Business Loans

blog1

Different Types of Business Loans

Here is a list of the best business loans in India:

Term Loans:

  • They are one of the most common types of business loans. Term Loans are provided for a specific period, usually ranging from one to ten years, and are typically used for purchasing fixed assets like machinery, equipment, or real estate.
  • These can be secured or unsecured business loans. Secured term loans require collateral, while unsecured loans do not, though the latter may come with higher interest rates.

Working Capital Loans:

  • Working Capital Loans are designed to finance the day-to-day operations of a business. They are essential for managing cash flow, covering operational expenses, and ensuring smooth business operations during off-seasons or periods of reduced revenue.
  • These loans are usually short-term and are repaid within a year. They can be secured against inventory, receivables, or other collateral.

Overdraft Facilities

  • An overdraft facility allows businesses to withdraw more money from their current account than is available. The bank charges interest only on the overdrawn amount.
  • This facility provides flexibility and is particularly useful for businesses with fluctuating cash flows.
  • The limit of the overdraft is generally determined based on the creditworthiness and relationship of the business with the bank.

Equipment Financing

  • Equipment financing is a specialized loan used to purchase machinery or equipment essential for business operations. The equipment itself serves as collateral, reducing the risk for lenders.
  • This type of loan is beneficial for businesses that rely heavily on specific tools or machinery, such as manufacturing units, construction companies, and medical practices.

Invoice Financing

  • Invoice financing, also known as factoring, allows businesses to borrow money against their outstanding invoices.
  • This type of loan is particularly useful for businesses with long payment cycles, enabling them to maintain cash flow while waiting for customers to pay their invoices.
  • The lender advances a percentage of the invoice value, and the remaining amount is paid after the customer settles the invoice, minus a fee.

Microfinance Loans

  • Microfinance loans are aimed at small businesses and entrepreneurs who lack access to traditional banking services. These loans for small businesses are provided by microfinance institutions and are typically small in amount but come with flexible terms and conditions.
  • These loans play a crucial role in promoting financial inclusion and supporting small-scale entrepreneurs in rural and semi-urban areas.

Startup Loans

  • Startup India loan schemes are specifically designed for new businesses and entrepreneurs. These loans help cover initial costs such as product development, marketing, and operational expenses.
  • Banks, non-banking financial companies (NBFCs), and government schemes offer startup loans, often requiring a solid business plan and sometimes collateral.

Government Schemes

  • Indian government offers various schemes to support businesses, particularly small and medium enterprises (SMEs). Some notable schemes include the Pradhan Mantri Mudra Yojana (PMMY), Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Women's Business Loans from the Government of India and Startup India Business Loan.
  • These schemes provide financial assistance with favorable terms, including lower interest rates and minimal collateral requirements.

Final Thoughts

blog1

Business loans

Choosing the right type of business loan scheme in India is crucial for the growth and sustainability of any enterprise. Indian businesses have a plethora of options to choose from, each catering to different needs and circumstances. Understanding these options and their respective benefits can help business owners make informed decisions.

Go to the IIFL Home Loans page and fill out an online loan application to learn about their affordable interest rates on home and business loans.

FAQs

Q1. What is a 59-minute loan?

Ans:  

The 59-minute loan guarantee provides MSME owners of businesses with in-principal clearance from multiple public sector banks for a business loan of up to Rs. 5 crore in 59 minutes.

Q2. Who can apply for a loan for a starting business?

Ans:  

The applicant must not be less than 21 years old, and older than 65 years of age. The candidate needs to be an Indian citizen. The application should include a business strategy.

Q3. Which loan is less expensive?

Ans:  

When compared to credit cards, personal loans typically have lower interest rates, which makes them a more affordable borrowing choice over time for greater expenses.

Q4. Which loan has a zero-interest?

Ans:  

There are two options available to you: government interest-free loans or interest-free loans from other lenders for things like school, homes, cars, travel, business, and other purposes.

Q5. What kind of business loans are most prevalent?

Ans:  

One of the oldest types of funding for businesses is a company term loan. Usually, money is given out all at once in one lump amount. Then, over a predetermined length of time, you pay back that amount plus interest on fixed, regular instalments.

Tags

apply loan

Quick and Hassle Free Loan Processing

Latest Blogs

green ad
Prelude to Building Green - IIFL Home Loan's Guide to Sustainable Affordable Housing
Download report

Most Read Blogs

Disclaimer: The information contained in this post is for general information purposes only. IIFL Home Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment, etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness, or of the results, etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability, and fitness for a particular purpose. Given the changing nature of laws, rules, and regulations, there may be delays, omissions, or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Home/ Loan Against Property/ Secured Business Loan/ Balance Transfer/ Home Improvement Loan/ NRI Home Loan/ Home Loan for Uniformed Services) loan product specifications and information that may be stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Home/ Loan Against Property/ Secured Business Loan/ Balance Transfer/ Home Improvement Loan/ NRI Home Loan/ Home Loan for Uniformed Services) loan.