How Can You Get Secured Business Loans Quickly In India?

If you are planning a new business venture or are already a business owner, you may find yourself in a situation in which you need access to finances. This could include capital to start a business or finances to help your business grow, especially in an unexpected financial crisis. 

Regardless of the situation, you need to be prepared for unforeseen circumstances. Being prepared with enough finances helps your business to survive, grow and compete effectively. There are usually two ways to get access to finances for your business. You can generate internal funds or look for business loans from external sources such as banks and financial institutions. Since internal funding is not ideal for long-term projects, external funding is considered the best option. 

A secured business loan is also known as collateralized credit and this type of loan requires a commercial or residential property, a piece of land or a movable object as collateral. The value of the mortgaged asset becomes the deciding factor of a secured business loan. 

What Is a Secured Business Loan?

Before learning how to get a secured business loan quickly, it is important to understand all the aspects of this type of business loan. This type of business loan is a scheme that financial institutions provide over tangible assets. Since lenders offer good interest rates for this type of business loan, it is cost-effective, less risky, highly secure and has a longer repayment tenure. 

Types of Secured Business Loans

There are two types of secured business loans:

• Secured by Collateral: This type of business loan is taken against security in the form of property (owned by the business), vehicles, equipment and more as collateral.  
• Secured by Personal Guarantee: This type of business loan is taken against assets that are owned by the individual, not the business.

Features Of Secured Business Loans

These are the multiple features of secured business loans:

• You can use a secured business loan for many purposes including business expansion, purchasing office space or land, enhancing inventory, consolidating debt and more.
• Secured business loans provide a low rate of interest compared to unsecured loans. 
• Secured business loans may also provide tax benefits, in some cases. 
• Depending on your business need and repayment capacity, you can apply for a secured business loan for a large sum of money.
• Debt repayment for secured business loans is longer than for unsecured business loans. 

How To Get a Secured Business Loan Quickly in India

You can get a secured business loan in India effortlessly. However, you need to consider some factors to ensure the process is smooth and quick, including:

Business Plan

A business plan plays a very crucial role in getting a business loan quickly. A business plan is where you state your business goals, the purpose of the loan and its uses to help the lender analyse your need for a loan. 

Eligibility

After the business plan has been prepared, it is essential to check if you are eligible to apply for a secured business loan. The eligibility criteria for secured business loans include:

• Businesses with limited liability, proprietorship companies and partnership companies. 
• An excellent credit score and a good payback history. 
• Between 21 and 70 years of age. 
• All documents that are related to show adequate cash flow. 
• All documents that are related to the assets being offered as security.

Loan Amount

Every secured business loan you take acts as a liability to your business. Therefore, opting for an appropriate business loan amount saves you from unnecessary financial burdens and chances of default.

Value of Collateral

Before applying for a secured business loan, be sure to check the value of the collateral with the lender. Lenders usually approve a secured business loan that is 70-80% of the collateral’s value. Moreover, although loans are offered based on cash flow, debt metrics and your requirements, the market valuation of the security plays a crucial role. Lenders usually grant loans on the loan-to-value ratio and the loan differs based on the property you are pledging for. It is highest for residential house properties and lowest for commercial properties and manufacturing units.

Repayment Capacity

You have to repay the loan amount borrowed plus the interest charged on the amount. When you negotiate the loan with the lender, ensure that you include a clause on partial or full prepayment of loans. You can use additional cash flow from higher sales to repay the loan, which will mitigate both debt and interest costs for the business.  

Documents Required For Secured Business Loans

Lenders usually look for a clear and marketable title to the security offered for the business loan. They make sure that you are eligible to offer the property for mortgage. So, once you are eligible to get a secured business loan, you need to prepare the financial and personal information documents which should include: 

• IT returns of the last two years (with competition) or CA-audited financials
• Form 16
• KYC documents (such as an Aadhaar card, voter’s ID, passport, etc.)
• Last six months’ bank statements
• Documentation concerning the property offered as collateral which should include:
  • Co-applications like spouses or blood relatives
  • Co-owners of the property
  • Names of partners, directors or shareholders

Once you have prepared your documentation, you can apply either online or in person in just a few easy steps with your bank or other financial institution who you will be borrowing the loan amount from. Once your documents are verified, the loan amount will be sent to your bank account.

Conclusion

A secured business loan against assets like property or even fixed deposits can help you acquire a low rate of interest, secure a high loan amount and build a good credit score. These loans also help you quickly when you are in financial need for your business. Based on your assets, you may consider applying for secured business loans with collateral or a personal guarantee. To find out more information about how to apply for secured business loans, visit Piramal Finance and read more informative articles on finances for your business.