A ₹5 Lakhs business loan offers small enterprises essential capital for growth and operations. Many entrepreneurs choose this amount to balance needs and affordability. You can apply for a business loan digitally. Lenders such as Bajaj Finance Limited and IIFL Finance offer fast disbursals and flexible terms.
Why Choose a ₹5 Lakh Loan
A ₹5 Lakh business loan strikes a practical balance for many small entrepreneurs. This amount often covers immediate needs without overburdening repayment. Read on.
Ideal scale for growth
- ₹ 5 Lakhs is substantial enough for working capital, inventory, or equipment.
- IIFL Finance notes financing this amount supports market expansion and machinery purchase.
Affordable repayment
- Loan terms often span 36 months, easing monthly EMI stress.
- Flexible tenures adapt to cash flow cycles.
Collateral-free options
- Many ₹5 Lakhs business loans require no collateral under CGTMSE or Mudra schemes.
- This removes barriers for those without major assets.
Competitive interest rates
- Lenders offer rates from mid-teens to mid-20s, depending on credit score and lender.
- These rates are manageable with stable cash flow.
Types of ₹5 Lakh Business Loans
Lenders offer various options tailored to different business needs. You can apply for a business loan that suits your repayment capacity and funding purpose.
Unsecured Business Loans
These do not require any collateral. Lenders assess your credit score, income, and business performance before approval.
Secured Business Loans
You must pledge an asset such as property, machinery, or stock. This reduces interest rates and improves approval chances.
Working Capital Loans
Designed to cover daily expenses such as salaries, rent, and vendor payments. These help maintain business continuity during lean periods.
Term Loans
These are disbursed in full and repaid in monthly instalments. Ideal for planned business expansion or large purchases.
Eligibility Criteria
Before you apply for a business loan, check if you meet the standard eligibility criteria. While requirements vary, most lenders follow a similar checklist.
Age of Applicant
You must be at least 21 years old to apply for a loan application. Most lenders set an upper age limit of 65 years at loan maturity.
Business Vintage
Your business must be operational for at least one to three years. Established businesses with steady revenue have better approval odds.
Annual Turnover
Lenders typically expect a minimum turnover of ₹10 Lakhs to ₹15 Lakhs. Higher turnover may lead to lower interest rates.
Credit Score
A CIBIL score of 685 or more is preferred. A score above 700 significantly boosts your chances of securing a ₹5 Lakh business loan.
Business Type and Registration
Proprietorships, partnerships, LLPs, and private limited companies are eligible. The business must be registered with the appropriate authority.
Location and Nationality
You must be an Indian citizen and resident. Some lenders may exclude certain areas from their serviceable locations.
Documents Required
Submitting the correct documents is vital when you apply for a business loan. It ensures faster verification and speeds up the disbursal process.
Identity Proof
Valid documents include PAN card, Aadhaar card, voter ID, or passport.
Address Proof
Accepted documents include utility bills, passport, rent agreement, or Aadhaar card.
Business Registration Proof
This may include the Shops and Establishments Act licence, GST registration, or company incorporation certificate.
Financial Documents
These include bank statements for the past 6 to 12 months, income tax returns for the last 2 years, and profit & loss statements.
GST Returns
Most lenders ask for GST return filings for the past 12 months to assess your business performance.
Step-by-Step Application Guide
Follow these steps to improve your chances of timely approval.
1. Assess Your Needs
Define why you need the loan—working capital, expansion, or equipment.
2. Research Lenders
Compare banks, NBFCs, and online marketplaces like %$$BrandName$$% and IIFL. Evaluate interest rates, processing fees, and documentation requirements.
3. Check Eligibility
Use online eligibility tools or check lender-specific criteria. Ensure your credit score and turnover meet the basic requirements for the business loan.
4. Collect Required Documents
Prepare all necessary paperwork, including identity proof, business registration, financial records, and bank statements.
5. Fill Out the Application Form
Complete the form either online or offline. Provide accurate business details, loan amount, and repayment tenure preference.
6. Upload or Submit Documents
Attach scanned copies if applying online. For offline applications, ensure self-attested hard copies are properly arranged.
7. Verification and Approval
The lender reviews your documents and may conduct a personal discussion or business visit. Upon successful verification, the loan is approved.
8. Disbursal of Funds
Once approved, the loan amount is credited to your account, usually within 24 to 72 hours depending on the lender.
A business loan of ₹5 Lakhs can be the financial push your enterprise needs to scale or stabilise. With digital platforms, applying is now easier than ever.
Disclaimer: No Business Standard Journalist was involved in creation of this content