Eligibility for a Secured Business Loan

Banks and NBFCs offer secured business loans to both existing and new customers.

• Individuals, startups, SMEs, MSMEs, and large businesses are eligible.
• Proprietorship firms, partnership firms, and limited liability companies can also apply.
• The minimum age requirement is 21 but the maximum age at loan maturity is 65 years old.
• Before applying for a secured business loan, the applicant or business must demonstrate sufficient cash flow and enough security.
• A minimum two-year history of operation.
• Running a profitable business for the past 2 years.
• Owning at least one of these properties, which include a factory, shop or house.

Characteristics of Secured Business Loan

• Usage: Secured business loans can be used for a variety of things, including business growth, purchase of equipment, leasing or purchase of a real estate for offices or other buildings, payment of rent or salaries, enhancement of inventories, consolidation of debt, hiring or training of staff, etc.
• Loan Amount: The loan amount ranges from Rs. 10 Lakh to Rs. 20 Crore, depending on the needs of the business and the borrower’s capacity to repay.
• Interest rate: Interest rates are lower than those of an unsecured business loan.
• Longer tenure: Compared to unsecured business loans, loan terms are longer (Max. 15 years).
• Security: Collateral security in the form of land, whether residential or commercial assets, is a form of security.

The advantages of secured business loans

• The Borrower can obtain a larger loan amount with a lower interest rate and a better credit score.
• The Borrower can obtain tax benefits from secured business loans.
• Flexible repayment alternatives with longer repayment terms and affordable EMIs

Types of Secured Business Loans

1. Secured term loan

A secured business loan is one you can obtain in exchange for a personal guarantee or by putting up an asset as security. For instance, you must mortgage the real estate you own in order to obtain a company loan against property.

2. SBA Loans

The Small Business Administration offers some guarantees for these secured loans. They offer a variety of lending options for small and medium businesses, including the 7(a), CDC/504, and Microloan Programmes.

3. Business Line of Credit

With this form of secured loan, you have access to a fund reserve that you can use as needed. The pool is filled to its original level once you have paid back the sum that was taken. The term “revolving credit” is coined for this reason.

4. Self-Securing Business Loans

There is no additional collateral needed for these secured loans. You could, for instance, use the equipment you’re about to acquire as collateral for an equipment loan. Fortunately, neither your personal nor professional assets are at risk.

Documents Required

• A PAN card of the applicant
• Photos in passport size
• Application form
• Identification documents like a passport, voter’s ID, and driver’s licence
• Address verification documents such as a driver’s licence, passport, utility bills, and an Aadhaar card
• Evidence of a business’s address, such as a copy of property records
• Evidence of income, a profit and loss statement audited by a CA for the previous two years, a balance sheet, ITR for the previous two years, and company account statements of the last six months
• Trade licence
• Establishment/sales tax certificate
• Memorandum of Articles (MoA) & Articles of Association (AoA).

There are numerous advantages to obtaining a secured business loan. You can easily borrow greater sums of money, even if you have a limited credit history. Undoubtedly, a secured loan is a great option for the expansion of your company.