Many of them are now ditching their high-income jobs, while others are stepping out of their household boundaries, to explore their entrepreneurship skills and hopefully run a successful business. A significant reason for the rising number of women in the start-up ecosystem is the availability of business loans.
From financial institutions to government schemes, there are now many different types of business loans that women entrepreneurs can consider for starting and running their business. Five of the top options that you can consider are-
1. Small Business FinanceAn increasing number of financial institutions now offer many different types of small business or SME loans. While most of these loans are only available for existing businesses, some of the lenders do offer short-term business loans for start-ups too. For instance, a popular option for small to medium-scale female entrepreneurs funding is LOC or Line of Credit.
With this option, the eligibility of the applicant is used by the lender for determining their maximum LOC amount. You can then borrow money from the lender up to this maximum credit limit. While repaying the loan, you will only be required to pay interest on the amount you actually used and not on the entire credit limit. New, as well as existing businesses, can use this option.
Lenders are generally very stringent when it comes to the eligibility of the applicants. So, make sure that you thoroughly check the eligibility requirements of the lender before applying. You will also have to provide some personal and business-related documents to avail SME loan. Even your credit score would be carefully evaluated to determine your eligibility.
Features of Small Business Finance
- Many different types of loan options to choose from
- Secured and unsecured funding available
- Affordable interest rate
- Ideal for short-term funding needs of women entrepreneurs
2. Commercial Business LoanIf you are looking for an instant loan for your existing business, you can also consider commercial business loans. These loans are generally ideal for medium-scale businesses wanting to expand their operations and looking to borrow more than what SME loans generally offer. This type of business loan for women does not require any security, and some lenders also offer instant online application and approval facility.
With a commercial business loan, you can borrow as much as Rs. 50 lakhs for a tenure of up to 3-5 years to easily manage your business expansion costs. Commercial business loans are generally offered to businesses that are at least one year old and have valid business proofs. You will also be required to submit your current account statement of at least one year to the lender to ascertain that you are running a profit-making business.
Some lenders also offer pre-payment facility with the help of which you can repay your loan before the tenure to reduce the interest burden. In case if you do have assets like commercial property which you can pledge, the loan amount can be increased further. Proper ownership proofs need to be submitted for the same.
Features of Commercial Business Loan
- Secured as well as unsecured loans available
- Loans of up to Rs. 50 lakhs and more
- Repayment tenure of 3-5 years
- Online application and approval
- Minimum documentation
3. Loan Against SecuritiesIf you are planning to start a small business or a home-based business, one of the most popular types of business loans in India that you can consider is a loan against securities. With this option, you can pledge your investments in the stock market, mutual fund, or life insurance policies and borrow a loan against the same. In most cases, with this type of loan, you are free to use the loan amount as per your requirement.
Financial institutions generally offer loans of up to 60%-75% of the market value of your investment as a loan with this option. You can repay the loan within the pre-fixed tenure and get your securities released from the lender. As this is a secured type of loan, the interest rate is generally lower than most other business loan options. These too, are usually short-term loans available for up to 4-5 years.
As you will be pledging your securities for the loan, the eligibility requirements of loan against securities are minimal. However, you will be required to provide adequate ownership proof of your securities. As such loans generally involve a lot of documentation; you are required to personally visit the nearest branch of the lender to apply for a loan against securities.
Features of Loan Against Securities
- Secured type of loan
- Lower interest rate and minimum eligibility requirements
- Faster processing
- Loans of up to 75% of the pledged securities
- Flexible repayment option
4. Personal LoanWomen entrepreneurs wanting to start a home-based business can also consider a personal loan. It is an unsecured type of loan which does not require you to pledge any security against the loan amount. Personal loans are offered based on the applicant's eligibility, including their monthly income and credit score. As a result, if you are a homemaker with no professional experience, the loan amount can be low.
However, if you are considering personal loan as a business loan for women’s in India, you do get the option to add a co-applicant like your spouse to increase your eligibility. Many lenders in India now offer personal loans of up Rs. 50 lakhs for up to 5 years. One of the most significant benefits of a personal loan is the fact that it is the most flexible type of loan which you can use for any of your personal or professional requirements.
So, a personal loan can be used for starting a business, expanding it, or just for managing the day-to-day expenses of an existing business. Moreover, some of the top lenders in India now allow you to apply for a personal loan online to offer enhanced convenience to the applicants. Online application and approval can help you save a lot of time and efforts.
Features of Personal Loan
- Unsecured type of loan with the freedom to use the loan amount any way you like
- Loans of up to Rs. 50 lakhs for up to 5 years
- Option to apply for loan online
- Co-applicant facility available
5. Government SchemesEven the government is doing a commendable job of promoting women entrepreneurship. There are multiple finance schemes that the government has launched exclusively for entrepreneurs. For instance, a common business loan for women in India is Pradhan Mantri Mudra Yojana. It has three different loan options- Shishu, Kishor, and Tarun for start-ups as well as existing businesses looking to grow their business further .
With the Shishu loan option, women entrepreneurs can get a loan of up to Rs. 50,000 for starting a small-scale business. Kishor and Tarun options are for existing businesses and allow a female entrepreneur to borrow up to Rs. 10 lakhs for a tenure of up to 5 years. The interest rates are one of the lowest in the country, and the eligibility requirements are minimal too. If you are considering government schemes for your business loan, know that the processing time is generally long.
There is also a Women Enterprise Program or Mahila Udhyami Yojana under the scheme with the help of which women entrepreneurs can get an interest discount of up to 0.25% on their business loans. Equipment Finance Scheme, Credit to Micro Enterprises, Mudra Card, and Refinance Schemes from Bank are some of the other important aspects of the Mudra Yojana to help female entrepreneurs.
Features of Government Schemes
- Low-interest rate and eligibility requirements
- Many different types of schemes to choose from
- Many banks and financial institutions are part of the schemes
- Flexible tenure of up to 5 years
Funding Your Dream BusinessIt can be challenging for a woman to break the stereotypes and be able to run a successful business. Initial funding is one of the most challenging aspects of being a female entrepreneur, but with the availability of all the different options discussed above, you can now overcome this challenge with ease.
No matter if you want to start a home-based business or are aiming for a full-fledged business with a nation-wide presence, consider all the different options listed in this post and select one that best suits your requirements. You can also discuss your requirements with a top financial institution to get the right recommendation.
Give special attention to factors like interest rate, loan tenure, repayment options, and reputation of the lender to ensure that you take a smart decision that can help you establish and grow your business. With so many different types of business loan available in India, rest assured that you can easily find one that can help you achieve your entrepreneurial dream.
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The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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