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Business Loan for Self-Employed Professionals

By Finserv MARKETS - Feb 26,2019
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How Self-employed Professional Can Get a Business Loan

Introduction

While it is easy for established business houses to obtain business funding, there are limited options for self-employed professionals to access finance to scale up their business. This especially holds true in the initial growth phase or as a start-up, when one is yet to break even and has limited savings. However, there is no need for budding entrepreneurs to be disheartened as all is not lost. In this article, we shall discuss the business funding options available to self-employed professionals.

1.Utilize one’s Savings:

One can use their own surplus funds to invest in one’s business, commonly referred to as bootstrapping. At the nascent stage, bootstrapping is often the ideal way to fund one’s business. It is difficult to obtain external financing unless the business is not yet on a firm footing and has generated reasonable revenues.

2.Personal Loan:

A self-employed individual can avail a personal loan for business purposes. Banks offer personal loans to customers with a good credit score and repayment capability. With Finserv MARKETS, the loan amount is limited at around Rs. 20 lakhs with a fixed tenure of around 12-60 months. The interest rate is higher, without collateral requirement and promptly disbursed.

3.Business loans:

One can opt for a business loan in case of a sole proprietorship concern. The loans sanctioned range up to Rs 50 lakhs with collateral cover. However, there is an additional criterion of achieving a certain turnover limit and vintage period requirement of at least 3 years of business operations. Some banks insist on profitability condition of 1-2 years and a minimal annual income (ITR) of Rs. 1.5 lakhs per annum.

4.Eligibility For Self Employed

The eligibility criteria for business loans may vary from one financial institution to another. It is always advisable to settle for a lender with minimum eligibility criteria. Moreover, you should also check your loan eligibility with the help of a business loan calculator beforehand. This will reduce the rejection chances of your business loan application. Business loan available at Finserv MARKETS has minimum eligibility criteria. It is mentioned as below:

  • You must be a citizen of India.
  • You must be between 26-66 years of age
  • You must have at least 3 years of business vintage.
  • Income tax returns of at least one year is required for your business

5. How to Apply

With leading financial institutions, you can apply for a business loan online easily from the comfort of your home. Let us have a quick look at the steps for applying for a business loan:

  • Online application

You can apply for a business loan easily through an online application process. You must fill the application form by mentioning all your personal and employment details. Upload the required documents online.

  • Specify loan details

Select the loan amount and the repayment tenure that best suits your needs.

  • Approval and disbursal

The financial institution will review your documents. Post verification of your documents, your loan application will be approved, and you would receive the loan amount in your bank account within a day.
Before you apply for a business loan, make sure that you satisfy the eligibility criteria set by the lending institution.

6.Loan for professionals:

Many banks offer custom-made loans for professionals like doctors, chartered accountants, architects, company secretaries, consultants etc. Most banks mandate 3-5 years of working experience post education, with a profit track record of at least 1-2 years and a Minimal Annual Income (ITR) of Rs. 1 lakh per annum. Such loans can range from Rs 50,000 to Rs 50 lakh and do not require collateral as security.

7.Overdraft:

Overdraft facility is an unsecured loan without collateral cover. A loan limit is set against a Current account, from which the borrower can withdraw an amount needed. Overdraft facility can range between Rs. 2 lakh to Rs. 50 lakh and can vary between 12-48 months. The interest is due only on the amount you have utilized or withdrawn from the account. The balance amount in the account can be used at any point of time.

8.Government-backed initiatives:

The Government is running several schemes to help self-employed individuals obtain business loans. Some schemes comprise MUDRA Loans, which are designed “to meet requirements of different sectors / business activities as well as business / entrepreneur segments.” Mudra loans are extended to non-farm enterprises in manufacturing, trading and services whose credit needs are up to Rs. 10 lakhs. These fall in the micro loans category and do not require collateral if the sum borrowed is up to Rs 10 lakh. Based on the amount required, the borrower can obtain the following types of business loans:

  • Shishu: loans up to Rs 50,000
  • Kishor: loans between Rs 50,000 and Rs 5 lakh
  • Tarun: loans between Rs 5 lakh and Rs 10 lakh

Mudra loans can also be classified under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme of SIDBI and Ministry of Small and Medium Enterprises. However, the scope of CGTMSE is wider, where, excluding retail traders, one can get collateral free business loans of up to Rs 1 crore. Almost all banks extend this kind of business loans.

9.Business loans from fintech lenders:

In case of failing to meet bank eligibility, one can approach fintech lenders for an online, collateral free, business loan at higher interest rates. The terms and conditions of fintech lenders are slightly relaxed than the traditional banks.

Also Read: Dos and Donts While Availing a Business Loan

Conclusion

While there are limited funding options available to self-employed professionals, the fund’s requirement also is not considered at the growth stage. Once the concern turns profitable, one can easily obtain a Bajaj Finserv business loan under favorable terms. After all, there is light at the end of the tunnel.

“Finserv MARKETS, from the house of Bajaj Finserv is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment, and an exclusive EMI store, all under one roof – anytime, anywhere!”

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522