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Every business requires funds to start and even to carry out its existing operations. And for which, a business person must know different sources of funds. A Project Loan can be one of the sources. This is where, LoanUncle helps you out. We’ll lift the heavy liftings for you to get your loan sanctioned by Bank or reputed financial institution/ NBFCs through a different set of Business Loans. And thus one may eventually fulfill their dream of becoming an entrepreneur by starting a new business or even financing or expanding their existing business. Business Loans can be secured as well as unsecured. Secured business loan, where security is given to the bank, usually has a lower interest rate. Banks and financial institutions also have other products apart from Business Loan like overdraft facilities to help one in financing daily needs of the business.
Overview – Project Loan
When beginning to establish a business of your own, if you wish to propel your business forward without financial glitches in the nascent stage, you will initially require a large sum at your ready disposal to fund your start up. Even when planning to expand existing businesses, it is essential to have an easily accessible reserve of capital to avoid any interruptions in your plans. In such situations, a Project Loan comes to your aid. Only a few Banks, NBFCs, and other financial institutions lend out Project Loans.
Alongside a Project Loan, another way in which a financial institution may help fund your business is by providing you with overdraft facilities. These help ease out short-term cash flows. The balance is assigned to your current account with the selfsame financial institution.
Project Loans can be either secured or unsecured. In a secured loan, the financial institution requires you to deposit one of your assets as security in exchange for their assistance. These usually come at lower interest rates. Unsecured loans do not require securities in exchange for the loan but come at higher interest rates as compared to secured loans to balance the risk that the bank takes by investing in the business.
Project LOAN INTEREST RATES
How to compare business loans.
- Compare per month EMI offered by different Banks.
- The processing fee charged
- The prepayment Charges, if any.
Documentation Required for Project Loan
Hereunder, we have compiled a list of documents that are generally required for project loans. However, the bank or financial institution may ask for more information/documents if required.
- Identity proof – voter IDs, PAN cards, passports, driving licenses, and Aadhaar cards are commonly accepted;
- Residence proof – voter IDs, passports, property tax receipts, or photo copies of landline or electricity bills are commonly accepted;
- Business existence proof – balance sheet and profit & loss account over the past three years is commonly accepted;
- Office Ownership Proof;
- Bank statements or passbook from the past six months;
- Income Tax returns;
- Statement of computation of income over the past two years;
- CA certified/audited profit-loss account statement;
- Audit report along with schedules of profit and loss – for principal amounts of over Rs.40,00,000;
- Balance Sheet over the past two years – for principal amounts of over Rs.40,00,000;
- Board Resolution – if a Pvt. Ltd company is your co-borrower;
- Partnership Authorization Letter – if a partnership firm is your co-borrower;
- Co-Applicant’s Income Tax returns over the past two years.
*All property documents if it is mortgaged.
Check Eligibility for Project Loan
Any Indian citizen running a legitimate business with an adequate turnover and income is eligible for a Project Loan.
Increasing Your Eligibility
Banks look for specific kinds of businesses to invest in, and meeting their standards increases your chances of obtaining a Project Loan. The criteria most banks adopt to differentiate between business to and not to fund are:
- Age of the company;
- Business Type – proprietorship, partnership, Pvt. Ltd., or Public Ltd;
- Business industry;
- Volume of turnover;
- Percentage of profits;
- Cash flows of the company;
- Credit history and other track records of the company.
Banks will scrutinize your business’ cash flows and profits to determine whether or not you will be able to pay your EMIs regularly. Thus, keeping these boxes checked can help you avail of a Project Loan. If your company’s record is exceptional, financial institutions are likelier to loan out larger amounts.
FREQUENTLY ASKED QUESTIONS – FAQS ON Project LOAN
How do I go about availing of a Project Loan in India?
This is where LoanUncle steps in. For no charge, we are available to guide you through the entire process of availing of the loan most suited to you.
- The first step, of course, is to have an established business or a business idea;
- Make sure all the documentation for your company is in order;
- Make sure all your documentation as a client is in order using LoanUncle’s documentation guide as an aid
- Calculate your eligibility through LoanUncle’s eligibility guidelines
- Do your research about the different lenders who might be willing to provide you with a loan using LoanUncle’s list of potential lenders;
- Compare loan possibilities from different financial institutions on loanuncle.org, and choose and apply for the one most suited to you;
- Wait for your bank to check your documents and credit scores, sanction your loan, and send you an offer letter;
- Revert with an acceptance letter, agreeing to the terms and conditions of the loan;
- Submit the originals to all your documents to the bank.
And that’s all! Then your lender disburses your loan amount and this process ends.
What security/collateral must I provide to avail of a Project Loan?
Your collateral could be in the form of one or more guarantors or your life insurance policies. You may also offer a surrender value in the form of shares, which should be equal to the loan amount. Even property and other assets are accepted as securities for Business Loans.
Can I pay off my Project Loan before time?
Yes, prepayment of Project Loans is allowed. This is executed when you pay up a lump sum. Your bank may apply penalties charges of ~2-3% of the outstanding principal amount. These penalties vary depending on your reason for prepayment and the source of your funds. This penalty may even be wavered if pay your EMIs regularly.
What additional charges will I have to incur to obtain a Project Loan?
Processing Fee – this may either be a percentage of the loan amount or the bank’s predetermined fixed amount;
Commitment Fee – this is levied if you are unable to repay your loan within the determined tenure;
Pre-payment Charge – this amount will not exceed 5% of the loan;
Miscellaneous Charges – some banks may levy charges for documentation screening, consultation, etc.
SOME OTHER LOANS INCLUDE:
Short Term Business Loan – Get this loan for short term and repay within 1 Year;
Business Loan – Get it if you want Unsecured loan to fund your business;
Short Term Personal Loan – Get it if you want to repay personal loan quickly;
Home Loan Balance Transfer – for when you find a Home Loan with interest rates lower than your existing Home Loan, and use this new loan to pay off the previous one;
Home Improvement Loan – for house renovation;
Home Extension Loan – for when you’re planning to expand your house by, for example, adding a new room or wing;
Land Purchase Loan – for when you want to invest in land, whether to build a structure on it in the future or not;
Loan Against Property – for when you need cash to invest in business or elsewhere against the property you have.