Need a loan? Self-employment funds in India explained now
What's the story
Starting your own business is like riding a roller coaster—thrilling, unpredictable, and full of twists. But when funds run low, the ride can come to a screeching halt.
That's where self-employment loans in India come to the rescue, offering a financial boost to fuel dreams, buy equipment, or manage cash flow.
From government-backed schemes to private lenders, the options are endless. So, before you dive in, here's a guide to help you pick the right loan for your leap!
Loan types
Types of self-employment loans available
In India, self-employed individuals have several loan options, including term loans, working capital loans, and overdraft facilities.
Term loans offer a lump sum amount repaid over a fixed period, while working capital loans are designed to cover daily operational expenses.
Overdraft facilities permit borrowers to withdraw funds up to a pre-approved limit, providing flexibility in managing cash flow.
Eligibility
Eligibility criteria for applicants
Eligibility criteria for self-employment loans differ among lenders but generally include being within a certain age range (typically between 21 and 65 years), having a stable income source, and maintaining a good credit history.
Some lenders might also stipulate a minimum annual turnover and require proof of your business being in existence for at least three years.
Fulfilling these criteria increases your chances of loan approval.
Documentation
Documentation required for loan application
Applicants are required to submit multiple documents while applying for a self-employment loan.
These generally include identity proof (Aadhaar card or PAN card), address proof (utility bills or rental agreement), income proof (bank statements or income tax returns), and business-related documents (registration certificate or GST filings).
Providing the correct documentation significantly reduces the loan processing time.
Interest & repayment
Interest rates and repayment terms
Interest rates on self-employment loans in India are highly variable, ranging from 11% to 30% depending on the lender, loan amount, repayment tenure, and the borrower's credit profile.
Repayment terms are also flexible, typically ranging from one to five years.
Selecting the right interest rate and repayment term can have a significant impact on the overall cost of borrowing.
Application tips
Tips for successful loan application
To increase your chances of loan approval, keep a strong credit score by paying debts promptly.
Develop a strong business plan that demonstrates growth potential.
Shop around and compare loan offers from different lenders to get the best deal.
Make sure all your documentation is accurate and complete before applying.
If you can, provide collateral as it can lower interest rates and shows you're committed to your business venture.