Personal Loans for Business Needs – All You Need to Know

If you are a business owner, there may be times when you face a cash crunch and require funds to meet your business needs. Can you apply for a personal loan to cover your financial needs in such situations?

A personal loan is an unsecured loan, which means you are not required to submit collateral to the lender to receive the funds. You can repay the investment in Equated Monthly Installments (EMIs) during the loan tenure, which, in most cases, is capped at 5 years. The loan amount you will be approved for varies by certain factors such as your credit score, repayment ability, the lender’s terms and conditions, etc. Read on to learn more about availing of a personal loan for business needs.

How to Apply for a Personal Loan to Cover Your Business Needs

Whether you are a self-employed individual or an owner of a business, you can take a personal loan to expand your venture, meet working capital needs, or help you tide over a short-term financial crisis. The benefit of applying for a personal loan to finance your business needs is that there is no restriction on utilizing the loan amount. Some leading banks and non-banking financial institutions (NBFCs) in the country offer personal loans at affordable interest rates. Listed below are a few ways through which you can apply for a personal loan for your business needs:

• Lender’s Website: Today, some banks and financial institutions allow those looking for personal loans to apply through their website. To apply through this channel, you will need to visit the lender's official website and key in the required details in the online application form, after which the structure can be submitted online. Before you submit your application, it is recommended that you use online tools such as the personal loan eligibility calculator tool and personal loan EMI calculator tool to know how much you are eligible to borrow and how much you can expect to pay every month for the loan, respectively. If the lender approves your loan application, you will receive the loan amount.
• Third-Party Aggregator Website: You can apply for a personal loan through a third-party financial services website like BankBazaar.com. An essential benefit of using a personal loan through a third-party aggregator website is that you can compare loans offered by multiple lenders on the same webpage and apply for a personal loan to a bank/financial institution of your choosing. This saves you a substantial amount of time since you won’t have to visit multiple lenders' websites to know the interest rate, processing fee, and payable EMIs. On BankBazaar.com, you can compare various loans, check your eligibility, and immediately submit an online application. Your loan amount will be disbursed quickly once the lender approves the application.
• Offline Channels: Apart from the above-mentioned online channels, prospective applicants can also visit a branch of a bank/NBFC to apply for a personal loan. In this case, you must inquire about the interest rate charged, the EMI, etc. If the charges and the EMI payments seem reasonable, you can complete the required paperwork and submit the necessary documents to the lender. Your application will be verified, and if it is approved, the loan amount will be disbursed to your account.

Documents Required

Here is a general list of documents that you will need to submit to a bank or financial institution when applying for a personal loan to cover your business needs:

• Application form
• Recent passport-size photographs
• Identity proof (Voter ID, passport, PAN card, driving license, etc.)
• Proof of address (Utility bills, ration card, rental agreement, driving license, passport, bank statement or passbook, etc.)
• Proof of age
• Form 16
• Bank statements
• Income tax returns filed for the last three years

*Note: The exact documents required for a personal loan may vary from lender to lender and by whether you are a pre-approved customer or not.

Benefits of Taking a Personal Loan for Your Business Needs

A personal loan is a great financing option for those requiring funds for their business. Listed below are the various benefits of taking personal credit to cover your business needs:

• No Collateral Required: Unlike loans against property or gold loans, you do not have to submit collateral to receive a personal loan.
• Customizable Tenure: Repayment tenures for personal loans generally range between 1 year and 5 years. Thus, you can choose a repayment tenure as per your needs.
• No Usage Restrictions: In the case of a home loan, the funds you receive can solely be used to purchase a house. In comparison, there are no restrictions on using the personal loan amount.
• Quick Disbursal: Based on the channel through which the loan application is made, the approved loan amount can be disbursed quickly. In most cases, the disbursal time usually ranges from a few seconds to about 48 hours.
• Affordable Interest Rates: You can avail personal loans at interest rates ranging between 10% p.a. and 24% p.a. The higher your credit score is, the more likely you will be offered a personal loan at a reasonable interest rate. To avail of a loan at the best interest rate, comparing interest rates charged by different lenders for the same loan amount is necessary.

It is relatively easy to apply for a personal loan if you meet the eligibility criteria of a bank/financial institution. Ensure to maintain a credit score over 750 to increase the chances of loan approval at an affordable interest rate. Once you receive the loan amount, you must remember to pay the due EMI throughout the loan tenure as scheduled to avoid any hassles with the bank or financial institution.