Eligibility Requirements for a Startup Loan:
- The applicant must be 21 to 65 years old
- Proof of personal ID such as PAN card or Aadhaar card
- Proof of address such as driver's license, Aadhaar card
- Company or solid PAN card
- Bank statement for the past six months
- Preliminary memorandum and organizational articles
- Two popular types of business loans are Line of Credit and Equipment Financing.
- Credit Line:
The credit line is more like a credit card where the card works in business rather than personal credit. The advantage of this loan is that the borrower does not have to pay interest on the loan for the first nine to 15 months, making it easier for beginners to cover the initial costs of starting a business. Similar to a credit card, the borrower needs to pay interest on the amount used. - Resources working
In this type of loan, the instrument is promised as collateral, allowing the financial institution to charge low interest rates but at high risk. The borrower must pay the amount used to purchase the equipment as they receive money from their business. The advantage of equipment is that the borrower can claim the benefit of the down payment.
Both of these types of loans require high credit scores and required documentation as set by the financial institution for punitive lending.
Like all other loans, a business start-up loan also has its share of profits and disadvantages:
Pros:
Although financial institutions review a business plan and its minutes details, they cannot control the operation of the business or they can direct creditors to the use of funds
The financial institution cannot claim business profit
The process of approving a loan is fast. Therefore funds are available immediately
Borrowers may claim interest on the interest paid on the loan
It helps to build a business credit rating
Cons:
Financial institutions impose stricter conditions on loan disbursements
The borrower needs to provide the financial institution with the exact details of their business plan, business operations, details of investors and potential investors, costs involved and profit expectations
Financial institutions often select businesses that already operate
