With Budget 2022 done and dusted, it has landed its focus on long-term growth, domestic manufacturing, upliftment of rural areas, urbanisation, and digital currency. The opportunity for growth in the business sector is enormous after the budget, which means that the business loan interest rates will be highly feasible.
Budget 2022 has proposed several policy changes for the business loan sector. There are highlights underlying the government’s commitment towards the MSME sector, and the allocation of funds towards infrastructure development has set out a futuristic vision for the nation. Given that many businesses have gone in vain after the pandemic, Budget 2022 is a relief for businesses seeking a business loan.
As the nation has started picking up the pieces after the tough years, the budget has introduced bold fiscal policies, tax breaks for MSMEs, and increased liquidity in the market. Therefore, there are a lot of opportunities in 2022 if you wish to take a business loan.
The conventional approach of getting a loan for small businesses has always been overdraft facilities, bank loans, and Line of Credit.
However, debt financing also involves:
- Due diligence by the banks regarding the financial health.
- Future projections of the business.
Therefore, it was essential for the new budget to focus on more straightforward credit facilities.
Alternative Credit Instruments in Budget 2022
After the disastrous pandemic, the new budget comes with relief for every small business. The pandemic, along with the subsequent lockdowns, has hampered small businesses’ credit-risk mitigation. However, there is a silver lining in the dark cloud in this budget.
There are various types of lending with low business loan interest rates that have been proposed in the new budget.
The low-return types of lending like asset-based lending, purchase order finance, corporate bonds, and securitised debts, along with medium-risk lending like convertible bonds and profit-participating rights, have been the primary focus.
The high-risk instruments are also a part of the alternative financing instruments like venture capital, angel investing, and crowdfunding.
There are many alternative financing measures and direct infusion of funds that have been proposed in the budget.
These can help small and medium-sized companies to kickstart with low business loan interest rates.
- Term loans have been offered to create a growth momentum and hire, purchase machinery, and explore business collaborations.
- The adoption of simple measures has reduced business loan interest rates, relaxed norms for collaterals, simplified loan sanctions, and E-KYC enablement.
- Credit instruments can eventually make lending easier for small businesses after this budget.
Business Loan Eligibility
As the new budget has emerged, you need to have various documents to be eligible for a business loan under the new norms.
For a self-employed individual, the business loan eligibility is not very complicated. You need to be between 25-65 years of age, along with having a business that has seen profitability for three consequent financial years.
In addition to that, your turnover needs to show an upward trend, and you need to get your balance sheet audited by a registered chartered accountant.
There are various documents involved for business loan eligibility. You require:
- Proof of income (balance sheet and profit-loss statement)
- KYC documents (PAN card, Memorandum and Article of Association)
- Photo identity proof
- Business proof (Copy of ownership papers, Copy of Partnership Deed, Sales Tax certificate)
- Bank statements for the past six months.
To improve your business loan eligibility, you need to build a good CIBIL score and pay off existing liabilities, loans, and credit card bills. A small business also needs to ensure that it is not availing various loans simultaneously, affecting creditworthiness.
Business Loan EMI Calculator
As the budget for 2022 is favourable for small businesses, you need to learn how to calculate your EMI to understand your finances better. It is essential to know the interest rates of various lenders before making a calculated decision.
The Business Loan EMI Calculator is a simple tool to compare various loans without any additional work. Here, you can select the best rates for your business loan after comparison.
There are various advantages of using this tool, and you can get your estimated EMI instantly.
- Calculations can be done instantly without any hassle.
- Different loan amounts can be compared at the click of a button.
- Lending amounts along with lenders and interest rates can also be compared easily.
Budget 2022 has emphasised flexible payment mechanisms and bundled product offerings as consumption loans. Small businesses can benefit a lot from the new budget as it would help the entrepreneurs manage liquidity over time with a business loan.
The new norms will bring the required operational efficiency while driving the economy forwards and nudge the businesses to approach the banks for a business loan.