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Factors you must pay heed to before comparing business loan offers

Business loans are essentially unsecured loans, taken to fund various business needs like equipment purchase, project execution, contributing to the working capital, inventory, expanding operations, hiring staff etc. Before you start comparing business loans, it’s important to first ascertain your exact requirements and how much funding you will need. Thereafter, you’d need to figure out the amount of business loan you are eligible for. It is only then that you’d be able to compare the best offers from different banking establishments and NBFCs. Usually, business loans are offered anywhere in the range of INR 1 lakh to 1 crore.

You should also be aware of different types of business loans you can avail. While some business loans are based on government initiatives, others are private in nature. A few examples of business loan types you can avail in India are: Pradhan Mantri Mudra Yojana, working capital loans, MSME loans, business loans for women, loan against property, term loan, SIDBI, machinery loan, loan against shares etc. You will need to figure out the best business loan product for yourself before starting comparing different offers. Last but not the least, whether or not you meet the eligibility criteria laid out by the lender, will decide whether you receive the business loan or not.

Business Loans Eligibility Criteria

Multiple factors go into deciding the exact amount of business loan you’re eligible for

Annual Turnover

Your annual turnover and profit will need to be more than a specific amount, in order to be eligible for a certain quantum of business loan.

Type of Entity

Your eligibility for a business loan will also depend upon the type of your business entity, whether you’re a private limited company, a limited company, a manufacturer, a self-employed professional or something else.

Banking account

You can negotiate better loan terms if you have an already existing long-term banking relationship with the potential lending establishment.

Credit rating

Having a good credit rating can go a long way in improving your business loan eligibility, as it is a strong indicator of sound financial health.

Documents Required for Business Loans

It cannot be denied that businesses require investment both at the start-up stage as well during expansions. It’s a common practice in the business world to take out business loans for such purposes. Considering the fact that most business loans are collateral-free, the lending establishments must do everything within their means to ascertain the creditworthiness of the borrower, and to ensure that their money is invested safely. They accomplish this by asking for and verifying various documents from the applicant. These documents help them in carrying out better risk-assessment and making a sound decision about the approval of the business loan.

From the borrower’s perspective, there’s no better way to expedite the disbursal of a business loan than to have all the required documents ready and in-place, well ahead of time. Other than that you should gain good understanding of the business loan documents expected from you, and ensure that they are supplied without any delays. Quick supply of business loan related documents also inspires confidence and trust in the lending establishment. Please note, the documentation requirements for business loans may vary from lender to lender. But there are certain documents which are mandatory for all types of applicants. Let’s go through them below:

Documents required for business loans

  • Business vintage proof
  • GST certificate
  • Last 4 quarters’ GST returns
  • KYC documents like Aadhar Card, PAN Card etc. of – Proprietor / Partners / Directors / Business
  • Office ownership proof
  • Last 12 months’ savings or current account bank statements of all the pertinent accounts
  • Audited financials of the preceding 2 years: Balance sheet as well as Profit & Loss statement
  • Business existence proof
  • Gumasta or Shop Act License (if applicable)
  • Any sanction letter/s or statement/s of existing loan account/s
  • Last 3 years’ ITRs, with computations

Comparing Business Loans

As business loans are unsecured loans (like personal loans), the interest rate charged on them is normally on the higher side. Hence, you must do everything within your means to carry out a fair comparison between various business loan offers from banks and NBFCs, before finalizing any of them. This comparison must also be carried out based on parameters like the quantum of the loan, disbursal time, repayment time period, offered interest rate, flexibility in documents, processing fees, approval success rate etc.

In essence, this process is very important to arrive at the right loan deal for your business. A deal that not only meets your funding requirements, but also doesn’t put any unwanted financial strain on your business’ bottom line. The lending marketplace in India is overflowing with all kinds of lenders. Carrying out detailed research on each and every lender by going over online and off-line resources can be a very tedious task. At GoSahi, we have made such comparisons extremely easy for you. On our website, you can compare the best business loan offers from various top-rated banking establishments and NBFCs, just by the click of a few buttons.

Interest rate

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No. of documents required

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