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Your bank statement is the application.
Business lending in India has moved on from balance sheets and guarantors. Most lenders now read twelve months of banking, your GST filings and your existing obligations, and decide from there. Present those three things properly and a good business gets funded quickly.
Structures
Five ways to fund a business.
Choosing the wrong structure is expensive. A term loan for a seasonal stock requirement means you pay interest on money you are not using; an overdraft for a machine purchase means the limit is gone when you need it for stock.
Working capital limit
A cash credit or overdraft against your current account. You draw only what you need and pay interest only on what is drawn. Best for stock cycles and seasonal demand.
Unsecured term loan
A fixed amount repaid over one to five years with no collateral. Sized from your banking turnover. Fast, but priced higher than anything secured.
Machinery & equipment finance
The asset itself is the security, so the rate is lower and the tenure longer. Common for manufacturing units, printing, food processing and commercial vehicles.
Secured business loan
Backed by property you own. The largest amounts and the lowest rates available to a small business, at the cost of a longer process and a mortgage.
Invoice-backed funding
For businesses supplying to companies on credit terms. Funding released against confirmed invoices, so your money is not stuck waiting for a buyer's payment cycle.
Overdraft against deposit
Where you hold fixed deposits, a limit against them is often the cheapest short-term money available — and it leaves the deposit intact.
Underwriting
What an underwriter looks for.
None of this is secret, but very few business owners are told it plainly. Fix these before applying and your sanction amount changes materially.
- Banking consistency. Regular credits across the month read far better than a few large lumps.
- Average balance. A balance that never falls to near zero signals a business that is not living hand to mouth.
- Returned cheques. Even one or two inward returns in the statement period can shrink your limit or sink the file.
- GST versus banking. Declared turnover and banked turnover should broadly agree. A wide gap raises questions.
- Existing obligations. Every running loan and card reduces what a new lender will give.
- Vintage. Most lenders want the business to have been running for a minimum period, and the current account to have history.
MSME
Registered on Udyam? Different doors open.
MSME lending is a separate track with its own schemes and its own economics. The most useful feature for a small unit is credit-guarantee-backed lending, where a guarantee fund covers part of the lender's exposure — which means collateral requirements are lighter than a normal business loan of the same size.
- Term loans for plant, machinery and unit expansion
- Working capital sized to your actual production and collection cycle
- Credit-guarantee-backed lending with reduced collateral requirements
- Priority sector treatment at banks, which affects both pricing and appetite
- Applicable to micro, small and medium units in manufacturing and services
Before you apply
Have the Udyam registration current and matching your actual activity, keep GST filings up to date, and make sure your machinery quotations and project cost estimate are from identifiable suppliers. Scheme-backed lending is checked more carefully than ordinary lending, and a mismatch between the registration, the returns and the proposal is the most common reason these files stall.
Talk it through →Paperwork
What to keep ready.
| Category | What is needed |
|---|---|
| Identity & address | Aadhaar and PAN of the proprietor, partners or directors, plus one more accepted address proof each |
| Business identity | PAN of the firm, GST registration, Udyam certificate, trade licence, and the partnership deed or incorporation papers |
| Banking | 12 months' statements for every current and operating account the business uses |
| Returns | ITR with computation for 2–3 years, and GST returns for the recent period |
| Financials | Profit and loss statement and balance sheet, audited where applicable |
| Existing credit | Sanction letters and repayment record for every running facility, including cards and vehicle loans |
| Machinery cases | Supplier quotation, specification and proforma invoice |
| Secured cases | Full property document set, tax receipts and encumbrance certificate |
Common questions