Business loans include working capital (cash credit, overdraft), term loans for machinery or expansion, invoice or supply-chain facilities where offered, and government-backed schemes with defined eligibility. Pricing and security depend on risk grade, vintage, financial quality, and collateral.
Common product shapes
- Working capital: revolving limits against stock and debtors; reviewed annually or on renewal.
- Term loan: fixed tenure for capex or structured expansion with EMI-style repayment.
- Secured vs unsecured: smaller-ticket unsecured business loans exist for strong profiles; larger lines often need collateral or guarantees.
What lenders scrutinise
Financials
- Audited or accepted ITR and financial statements
- Banking turnover and GST returns
- Debt service coverage and leverage
Non-financial
- Industry risk and seasonality
- Promoter experience and shareholding
- Legal entity documents and compliance
Collateral and guarantees
Property, deposits, receivables, or machinery may secure the facility. Promoters often give personal guarantees or corporate guarantees from group companies. Understand joint liability and what assets are charged in the deed of hypothecation or mortgage.
Purpose and monitoring
Lenders track end-use of term loans (e.g. invoice for equipment). Working capital may require stock statements and turnover certificates. Covenant breaches—minimum DSCR, debt-to-EBITDA, or reporting delays—can trigger fees or recall.
Documents often requested
- GST registration, MOA/AOA or partnership deed, KYC of promoters
- Last 2–3 years ITR, P&L, balance sheet, and projections if asked
- 12–24 months bank statements (operating and sometimes personal)
- Loan account statements of existing borrowings
Before you commit
- Align facility type with cash conversion cycle—avoid long term loans for purely short-term gaps unless strategy is clear.
- Compare all-in cost including processing, insurance, and renewal charges.
- Discuss prepayment and switching options with your CA and relationship manager.
Disclaimer
Aroundu Wealth Capital provides educational information and advisory support. We are not a lender. Approvals, pricing, and covenants are set solely by financial institutions. Nothing here is a credit offer.