Swayamsiddha Foundation

Business loan is a credit facility offered by Banks and NBFCs to meet the financial requirements of self-employed customers and enterprises. It can be availed by individuals, MSMEs, business owners, entrepreneurs, professionals (CAs/Doctors), and several other business entities.

Business loans are majorly classified into two types, such as secured loans and unsecured loans. Secured loans are types of loans that require collateral/security, that a borrower needs to deposit with the lender to avail a business loan. However, in the case of unsecured loans, there is no need to submit any collateral/security with the bank, NBFC, or any other lender.

Banks/NBFCs offer both secured and unsecured business loans, including Term Loan (Short-term/Long-term), Working Capital Loans, Cash Credit, Overdraft, Letter of Credit, Bill/Invoice Discounting, Equipment Finance, Machinery Loans, POS loans, Loan under Bank Guarantee, Loan under Govt. schemes, etc.

The minimum loan amount offered starts from as low as Rs. 30,000 that can be availed from Small Finance Banks (SFBs), Regional Rural Banks (RRBs), or Micro Finance Institutions (MFIs). Borrowers can avail collateral-free business loans for up to Rs. 1 crore from leading private and public sector banks. Small business loans are also available for MSMEs and Startups at competitive interest rates.

On our online platform, the business loan interest rates offered by financial institutions start from 16% p.a. onwards and are further determined as per the applicant’s profile, eligibility & business requirements. Below mentioned are the business loan interest rates offered by leading banks and NBFCs. 

Bank/NBFC/Fintech	Interest Rate
IIFL Finance	11.75% – 25.75% p.a.
HDFC Bank	11.90% – 21.35% p.a.
FlexiLoans	1% per month onwards
ZipLoan	1% – 1.5% per month (Flat ROI)
Axis Bank	14.25% – 18.50% p.a.
IDFC First Bank	14.50% p.a. onwards
Kotak Mahindra Bank	16% – 19.99% p.a.
Fullerton Finance	17% – 21% p.a.
Bajaj Finserv	17% p.a. onwards
RBL Bank	17.50% – 25% p.a.
ICICI Bank	18% p.a. onwards
Indifi Finance	1.5% per month onwards
Lendingkart Finance	1.5% – 2% per month
Tata Capital Finance	19% p.a. onwards
NeoGrowth Finance	19% – 24% p.a.
Hero FinCorp	Up to 26% p.a.

Interest Rates are updated as on April 2022.

Credit Scores

Credit score plays a significant role in the loan approval process. It represents your credit history along with the repayment timeline of availed funding products. Generally, any credit score of 750 or more is considered good by the financial institutions. However, if your credit score is bit low of 650 or above, there are still chances of loan approval from some NBFCs, Small Finance Banks and Micro Finance Institutions.

The credit score eligibility defined by financial institutions are different for individuals, self-employed professionals, MSMEs, retailers or manufacturers and other business entities.

Different ranges of credit score is required by banks/NBFCs, from borrowers who require various types of business loans, such as term loan, working capital loan, letter of credit, overdraft, POS loans, etc. The credit score range defined by the lender for a specific loan product shall vary from applicant to applicant and loan types.

People with New-to-Credit should also start to build a credit score for loan approvals, as applicants with low credit scores are always at higher risk of loan rejections. Startups require even higher credit scores to avail business loans and they are new to the lending market and are about to set up a new business. Therefore, build and maintain a good credit score to enhance the chance of loan approval.

Eligibility Criteria

• Business Tenure: Minimum 1 year or above
• Minimum Annual Turnover: Rs. 12 lakh or above for existing enterprises
• Credit Score: 750 or above
• Applicants with No past loan defaults

Eligible Entities

• Individuals, Business Owners, Entrepreneurs, Self-employed professionals, Startups and Micro, Small, and Medium Enterprises (MSMEs)
• Private and Public Limited Companies, Sole Proprietorship, Partnership Firms, Limited Liability Partnerships, and Large Enterprises engaged only in Manufacturing, Trading or Services sectors
• NGOs, Co-operative Societies, Trusts and professionals, such as CAs, Doctors, Architects, Company Secretaries, Designers, etc.

Documents Required

When applying for a business loan, you will need to submit the following documents:

• Duly filled application form along with passport-sized photographs
• KYC Documents of the applicant, including PAN card, Passport, Aadhar Card, Driving License, Voter ID card, Utility Bills (Water/Electricity Bills)
• Last 1 years’ bank statement
• Copy of Non-Collateral Overdraft, if any
• Copy of Business Incorporation
• Any other document required by the lender

For taking a business loan from the bank for a new start-up business, the borrower must represent the project report of their business. All the necessary requirements and official documents have to be submitted with the project report. The project report should be such that it should represent the idea of the whole business and can be easily understood by the reader.

Elements of Project Report

Let’s discuss the standard format for the project report for bank loans of new businesses.

Introductory page

• On this page, the introduction of your new business is to be given
• The aim of the business and on what purpose you have chosen this business all these points should be mentioned in this introductory part

Summary of the project

• Summary of the project should consist of the overall status of the business
• Time to be consumed in working or manufacturing something should be there
• The budget of the whole business should also be mentioned

Scope of the project

• Scope of your business should be clearly described
• It should contain the percentage of work that you planned and the percentage of planned work that has already been completed
• Quick overview of results and planning of next steps should be included

Details of Promoters

• The promoters are the mediator for the business which helps for the promotion of the business
• The details of the promoters and their educational qualifications and work experiences etc. should also be given in the report

Details of Employees

• The details about the employees working this business should be written
• Their educational qualifications should also be mentioned
• The work experiences and details about the top management should also be written

Infrastructure Facilities

• Information about infrastructure facilities should also be mentioned like whether the tools have been deployed or not
• Also, write about the conditions of the operational premises and what all are used
• Types of machinery used in the business should also be mentioned

Customer Details

• Information about customers should be well written like, what are the types of customers you have targeted for selling your business items
• The prospective customer’s details should also be mentioned like is they from the big organization and also what is their capacity of buying goods in this business

Regional Operations

• Many times a company opens branches in different areas or regions. The branches may be set up nationally and internationally, as per the requirements
• When you make a project report you have to write about the different setups you made in which region and also write about the operation teams
  

Fiscal Acquisitions and Tie-ups

• You have to write it down in the project report with whom you have done tie-up or which stock or acquisition you have taken and all details of it should be mentioned in the report

Means of Financing

• The financing in the business can be done by the financial corporation or the business partners or somewhere else
• So, it is very important that from where the funding is coming, so this all should be mentioned in the report

Balance Sheets

• Balance sheets tell about where the money has been spent
• Also in what areas and fields the spending has been done is also noted. Thus all the accounts of the business will be seen in this balance sheet
• It is important to show the balance sheets of your company to the bank and it should also be mentioned in the report

Profit and Loss Statements

• How much the profit will company make and how much profit is making the business has to be in the report
• Whether the business is making any profit or loss the statements should be shown to the bank and also being mentioned in the report

Fund Flow Statement

• The funding given by any corporate or government and where it is used and in what fields of business the funding is flowing should be mentioned in the project report

Break-Even Points Evaluations

• Give the evaluations of the whole project report in even points and mention everything about your whole business
• Project Feasibility Ratio: Deciding on the ratio of cost, discounts, and revenue

Project Feasibility Ratio

Project Feasibility Ratio is basically deciding on the ratio of cost, discounts, and revenue of an enterprise. It can be presented in the form of a graph by mentioning the year-on-year comparison between revenue and expense. The project report should also contain the expense split-up graph.

The components of Project Feasibility Ratio are below mentioned that are required to be displayed as per year-on-year comparison:

• Current ratio
• Quick ratio
• Interest coverage ratio
• Debt equity ratio
• Gross profit Sales Percentage
• Net profit Sales Percentage
• Return On Capital Employed

Scope of the project

The scope of the project should have below mentioned details:

• Promoter(s) details
• Product / services & process
• Plant & machinery / equipment
• Market potential & Strategy
• Manpower requirements
• Risks & Mitigation strategy

FAQs

Ques. Is it necessary to make a project report for a bank loan?

Ans. The project report is very much necessary when you’re going to take a business loan for your business.

Ques. What are the necessary contents used in the project report?

Ans. The necessary contents preparing in project reports are:

• Introductory page
• Summary
• Details about the promoters
• Details of employees
• Details about Infrastructure
• Details about customer
• Regional operations
• Fiscal acquisitions and tie-ups
• Means of financing
• Balance sheet
• Profit and loss statements
• Fund flow statements
• Break-even point evaluations
• Conclusion

Source

SIDBI on its Portal Udyami Mitra, has hosted several Project Reports for the information and reference of prospective entrepreneurs. You can visit https://udyamimitra.in/page/project-reports to read those project reports.

A entrepreneur requires to prepare Project Reports to study the viability, sustainability of his / her business. We are providing below sample Project Reports, which you can use as a reference point for preparation of your Sample Project Report.

Click here to View Sample Project Report