Types of Loans from AFC

Understand the loan schemes and see if it meets your requirements. You can select a suitable type of loan based on business necessity, from business expansion to equipment finance.

Standard business loans include: -

General Term loan –

MSME and SME loan is a type of business loan specially designed to fund operations of any micro, small, or medium-sized enterprises.

Working Capital loan –

Working capital loan is a type of business loan taken to finance everyday operations in a company, especially when the liquidity is inadequate. You can use a working capital loan to settle expenses like payroll, rent, operational costs, or inject cash into your business during off-seasons. Term loans are for long-term investments, such as capital expansion, capital expenditure, or purchasing fixed assets.

Equipment Finance Loan –

These loans help enterprises obtain funds for investing specifically in new equipment or machinery to improve their production process and enhance productivity.

Microfinance Scheme

Start-up loan : A start-up loan is specifically for new business ventures. It provides an influx of cash to start-ups during their initial years so they can easily meet their financial obligations.

Once you have selected the type of business loan, apply offline, based on your convenience. Also make sure you understand the eligibility conditions.

Prepare essential documents

Essential documents you can furnish to process the loan.

The document verification is one of the most crucial ones. Therefore make sure the documents are duly attested and audited as required.

Factors in the Loan Approval Process

Appropriate measures to get approval favourably are as follows:

Appropriate measures to get approval favourably are as follows::

If you only need the loan to finance inventory purchase, applying for a working capital loan does not make sense. Make sure you choose a loan type to fit your business needs to avoid bad debt. Besides, with the right kind of loan, you can also secure a competitive business loan interest rate.

Business plan :

Be transparent about the financial health of your business without omissions or additions. Provide complete details, including previous years’ performance reports, current financial position, and future plans. Also, detail out how you will use the borrowed funds to earn the trust of the lender. You can use a business loan EMI calculator to make financial projections. A comprehensive business plan backed by suitable credit history will enhance your credibility and consequently, chances of approval.

Credit score :

Your credit score validates your creditworthiness. Make sure you have a score above 700 for assured loan approval, especially since most lenders will evaluate your business loan eligibility based on it. If not, try to raise the score before you apply.

In addition to the factors mentioned above, you should expect a personal discussion with a loan officer to understand the various objectives related to the loan.

You may be asked about your educational qualification, previous debts, income sources, and more. To ensure the discussion ends on a positive note, maintain transparency in your answers. Talk about your financial state clearly, and with confidence.

Eligibility for MSME Loans

Given are the eligibility criteria for MSME loan schemes:

• All MSMEs engaged in the trading, manufacturing and service sectors.
• A business must have a minimum of Rs.2 lakhs income per year, and their minimum turnover should be around Rs.10 lakhs per year.
• Businesses must have a good repayment history with financial stability.
• Businesses should not have any previous loan default with a financial institution.
• The applicant or authorised signatory must have worked and have few years of experience in the business field.
• Individuals, business owners and MSMEs who have established the following type of business engaged in the services, trading and manufacturing sectors can apply for MSME loans:
  • Private limited companies
  • Public limited companies
  • Sole proprietorships
  • Partnership firms

Guidelines for early approval

On average, the process from loan application to disbursal typically takes minimum of 2 months and primarily rides on how satisfactorily you filled the application form. If lenders encounter any incorrect information or missed data field, they may delay or reject the loan in some cases. Because a loan application form collects relevant information about the borrower, you must apply carefully. Or else, you may have to repeat the business finance application steps from the start.You will be provided the loan details and the EMIs and plan your finances similarly.

Moreover, you can use the following tips to speed up the disbursal process seamlessly

• Research the market for a suitable lender before you commit.
• Make sure you follow all the business credit application steps to the T.
• Facilitate open communication with the lender to understand major red flags.
• Keep your financial record updated, especially in case of previous debts.
• Pay off any outstanding debts to increase your capacity to borrow

Now go ahead for a loan?

Now that you know how to get a business loan, turn to AFC.