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

A personal loan is a type of unsecured loan, which means that you are not required to submit collateral to the lender to receive the funds. You can repay the investment in the form of Equated Monthly Installments (EMIs) during the loan tenure, which, in most cases, is capped at 5 years. The loan amount that 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 know more about availing 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, to meet working capital needs, or to 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 how you can utilise the loan amount. There are some leading banks and non-banking financial institutions (NBFCs) in the country that 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 for the same through their website. To apply through this channel, you will need to visit the official website of the lender and key in the required details into 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 your loan application is approved by the lender, you will receive the loan amount.
  • Third-Party Aggregator Website: You can also apply for a personal loan through a third-party financial services website like BankBazaar.com. An essential benefit of using for 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 the websites of multiple lenders to know the interest rate charged, processing fee charged, and the 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 application is approved by the lender.
  • 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 will need to inquire about the interest rate charged, the EMI, etc. If the charges and the EMI payments seem reasonable to you, you can fill 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 licence, etc.)
  • Proof of address (Utility bills, ration card, rental agreement, driving licence, 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

For those requiring funds for their business, a personal loan is a great financing option. Listed below are the various benefits of taking a 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.
  • Customisable Tenure: Repayment tenures for personal loans, in most cases, range between 1 year and 5 years. Thus, you can choose a repayment tenure as per your needs.
  • No Usage Restrictions: In case of a home loan, the funds that you receive can solely be used to purchase a house. In comparison, there are no restrictions on how you can use 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. The disbursal time usually ranges from a few seconds to about 48 hours, in most cases.
  • 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 it is that you will be offered a personal loan at a reasonable interest rate. To avail a loan at the best interest rate, it is necessary to compare interest rates charged by different lenders for the same loan amount.
It is relatively easy to apply for a personal loan if you meet the eligibility criteria of a bank/financial institution. Make sure to also 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 have to remember to pay the due EMI throughout the loan tenure as per schedule to avoid any hassles with the bank or financial institution.