ULI Business Loan 2025: Eligibility Criteria and Loan Types

Continuous financing is necessary for any firm to achieve long-term stability and growth. However, when business owners struggle with cash shortages, they look outside for capital. While some entrepreneurs prefer business loans, others offer shares of the firm to obtain external financing. These loans are credit instruments that do not require equity, assets, or other pledges to receive the funding.

A business loan is a type of loan offered to entrepreneurs who are operating their businesses but need external financing to keep them running. The investment pays for hiring more employees, paying rent, buying equipment, and growing the company into new cities.

To assess their eligibility, lenders look at terms such as the business owner’s credit score and company turnover. However, the business owner or entrepreneur is legally bound to use the loan amount only for business purposes, not for personal needs.

Since lenders charge interest on the principal amount, which the borrower has to repay in full within the loan term, repayment is another factor contributing to the definition of a business loan. You must read the Kotak Bank Business Loan.

Since every organization operates in different sectors and industries, the capital requirements of any one sector are not the same. Lenders use specialized business loans to ensure that they successfully meet the capital requirements of all types of businesses. These are some of the most popular business loans that entrepreneurs can apply for.

There are broadly 8 types of business loans available in India:

A term loan has a fixed repayment period and is repaid in regular installments. Three types of term loans are short-term, medium-term, and long-term. Both have repayment periods ranging from 12 months to 5 years. Short-term loans are defined as term loans with less than 12 months, and long-term loans are defined as term loans with five years or more. 

Business loans up to Rs 2 crore are available without any collateral; however, the maximum amount can be higher depending on the demand of the enterprise. The lender determines repayment terms for term loans at the time of loan application.

A funding option known as “bill or invoice discounting” allows the seller to receive an upfront payment from the lender at a lower rate. It asks consumers to help financial institutions generate more income through interest payments and monthly fees.

For example, you sold goods to Mr. Rakesh, and the bank issued you a 45-day letter of credit. If you request the money before 45 days have passed, the bank will charge you an interest rate; this will be referred to as the seller discount.

Furthermore, assuming that the amount you will receive in 45 days or less is Rs 10 lakh, you now receive Rs 9,50,000 from the bank at an interest rate of Rs 50,000 due to the bank’s discount. On the forty-fifth day, the buyer will deposit Rs 10 lakh in the respective bank. You can also check the YES Bank Business Loan.

Individuals, business owners, startups, and MSMEs use working capital loans to hire employees, pay salaries, purchase raw materials, expand their inventory, improve cash flow, and meet the everyday needs of their operations. Working capital loans are often short-term loans, up to Rs 40 lakh, with a repayment period of up to 12 months, depending on the firm’s needs. 

The average company loan or long-term loan has interest rates lower than loans provided by banks and non-bank financial companies (NBFCs). With such a loan, the borrowing capacity of the business is limited by the lender and can only be used for specified business needs.

A letter of credit is a credit limit used primarily on trading businesses, where a bank or lender guarantees money to companies doing business across borders. Letters of credit are helpful for business owners to import and export. 

Businesses doing business abroad often deal with unknown suppliers, and before any transactions can proceed, these suppliers must guarantee payment. As a result, a letter of credit is necessary to ensure payment to vendors.

The bank will provide its account holder with an overdraft facility, allowing him to withdraw money from his account even if there is no money. Only the amount used from the authorized limit is subject to daily interest charges. The relationship between the account holder and the bank, credit history, cash flow, and repayment history (if any) all play a role in determining the approved credit limit.

The annual revision of the overdraft limit allows any use of the credit limit as long as the interest is paid on time. The overdraft facility is granted subject to securities or collateral, especially in the case of FDs issued by the bank.

Borrowers can update their existing equipment or purchase new equipment with the help of equipment finance or machinery loans. Most of the equipment finance users are large corporations and manufacturing-related businesses. Businesses or business owners who obtain loans for machinery or equipment financing also benefit in terms of tax. Each lender has different interest rates, loan amounts, and repayment schedules. Also, check the Axis Bank Business Loan.

POS loans, also known as merchant cash advances, are contracts in which the supplier receives a lump sum payment in advance from the business owner through future or daily credit or debit card transactions. SME retailers often face a short-term financial crunch. As a result, businesses use POS loans to ease their cash flow problems.

POS loans have a higher interest rate than other business loan types. The payback option is linked to debit or credit transactions made through point-of-sale (POS) devices in supermarkets, retail establishments, and shopping centers. It would help if you had a general understanding of the different types of business loans offered by Indian lending institutions.

Business loans are available at reasonable, attractive rates with flexible, straightforward interest payments. Comparing loan offers from top public and private sector banks, NBFCs, small finance banks (SFBs), microfinance institutions (MFIs), regional rural banks (RRBs), and other banking and financial institutions can help you choose the best business loan offer.

For individuals, MSMEs, women entrepreneurs, and other businesses in the commerce, service, and industrial sectors, the Government of India has launched several loan programs. Several financial organizations, including public and private sector banks, NBFCs, Regional Rural Banks (RRBs), Micro Finance Organizations (MFIs), Small Finance Banks (SFBs), etc., offer loans under the government initiative. PMMY includes several notable government loan initiatives, such as PMRY, Mudra Yojana, PMEGP, CGTMSE, Standup India, Startup India, and PSB Loan in 59 Minutes.

The following individuals can apply for a business loan:

Proprietorships, partnerships, private limited companies, and one-person businesses need to submit the following paperwork to apply for a business loan successfully: