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Different Types of Business Loan for Women

There is a phenomenal growth on the business, enterprise, manufacturing, and industry sector of India and the MSME segment contributes to almost 45% of the output and 40% of the GDP growth of the country. With the emergence of revolution in business finance and with the advent of FinTech platforms, it has become convenient for women to participate in the business industry which traditionally was considered a taboo or a social stigma. 

Private, public, and government sectors are encouraging women to employ themselves in rural and urban India by giving loans for women entrepreneurs. It has become easier for women to supply equally as men to thrive in the world of business.

Business Loans for Women:

48% of India’s population constitutes of women but sadly only 25% of this percentage is involved in economic activities. To encourage maximum participation, a quick and easy access to ready finance is made available to women to increase the current data of 8 million women entrepreneurs multiplied by a number of times.

Features of Business Loans for Women

A few features of business loan for women entrepreneurs are:

Minimum and Maximum Limit of Business Loans Minimum – Rs. 50000

Maximum – Rs. 2 crores

Collateral or Security Not Required
Rate of Interest Varies between 7.85% to 8.10%
Tenure of these loans Can go up to 10 years
Time taken to procure a business loan for women If applied online, maximum 72 hours taken to complete the verification process and final disbursal of the loan.

Some lenders also provide a 24-hour loan facility

Repayment 1 – 36 months. For some lenders can also go up to 5 years
Hidden Costs Besides the loan processing fee of 1-2%, there are no hidden costs to the loan
Repayment penalty or charges After the payment of the first EMI, the load can be pre-paid in installments or in full at any point of time without any repayment charges, penalty or costs involved.
Eligibility Criteria Turnover of Rs. 90,000 for 3 Months
Payment of installments Can be customized as per weekly, bi-monthly, monthly payments.

 

Benefits of Business Loans for Women

There are many advantages of applying for business loan for women entrepreneur like:

 

  • Unprejudiced process of loan approval for women: The entire process of loan disbursal and availability relies on the fact that in India, there should be no discrimination on the bases of gender, caste, culture, or creed as far as economic growth is concerned. Same applies for women who are offered the opportunity to participate in individual financial growth with a simple process.
  • Easily accessible: Many Banks, NBFCs, and other financial institutions are gladly offering loans to women without collateral to encourage them to be a part of the growth of the economy of India considering their high potential, expertise, and proficiency.
  • Concession on Rates of Interest: Many financial structures offer a concessional rate of interest to loans given to women so that they can apply the surplus amount diligently into the smooth running of their business.
  • Simple repayments: Women have the leverage to pay their instalments on a weekly, fortnightly, or monthly basis as per their convenience. Also there are no additional charges if they want to pre-pay their loan after the first EMI goes through which is an added benefit.
  • Growth in Business sector reducing the risk of cash flow: It is crucial for any business or enterprise to have a smooth cash flow and propagate growth in the running business. For the same purpose, loan for women entrepreneurs are processed to recover hinderances and to run her business in a hassle-free manner and without any cash or capital restraints
  • Helps the women in being her own boss: For women, it can be quite a task to manage between her home and work since she is always burdened with multiple responsibilities. Instead of reporting to a senior and be answerable for any delays which can occur at any point of time in her career, she has the freedom to be her own boss and run the business entirely on her calibre and convenience.
  • Makes the woman eligible for higher, long- term and better funding: By taking short term loans and maintaining a good credit history and a credit score, she can open doors to higher funding options which will give the benefit of better growth and development opportunities.

 

Documents Required for a Business Loans for Women

Application Form Should be filled in appropriately and signed and stamped wherever required
KYC Documents She should have the following handy before applying for the loan:

  • Articles of Association
  • Business Entity proof
  • Shops and establishment Certificate
  • Incorporation Certificate
  • Partnership deed
Financial Proofs
  • Current Year performance and a Projected turnover is required
  • Tax audit reports
  • Profit and Loss report
  • Balance Sheet
  • VAT Returns
  • Audited and Provisional Financials etc.
Bank Statements Last 6 months to be made available
PAN Card Of the business entity, partners, proprietors, entrepreneurs, and co-applicants
Photographs Passport size photographs of applicant, partners, and co-applicants
Address proof Required of the applicant/co-applicants and the business entity

 

How to Apply for a Business Loan for Women?

By following 3 simple steps, any woman can apply for a quick and easy business loan:

  • Step 1 – She needs to visit the appropriate website and apply for the loan by filling an online application and then submit it.
  • Step 2 – After submitting vital information like her personal and financial details she needs to upload the relevant documents.
  • Step 3 – The bank/financial institution will review the forma and the details attached, complete the verification process and if it is approved, the loan will be disbursed within 3 business days.

Types of Business Loans which are offered exclusively for women:

 

  • Small Business Finance: Funds female entrepreneurs to start-up a new business of their own. 
  • Different types of SME Loans are available for this purpose popularly called as Line of Credit and a maximum amount is fixed which is available for women entrepreneurs. 

 

    • New and existing business can be supported with these loans. This needs only one re-payment, and only the interest amount needs to be paid and not the principal amount that has not been used. 

 

  • The process of applying for these loans is stringent so women must have access to all necessary documents and apply for the loan diligently. Credit score of applicants and personal and business-related documents will be thoroughly verified.

 

 

    • Commercial Business Loan: These SME Loans are provided for medium scale business and industries with the benefit of instant application and immediate disbursal. 
    • These are unsecured loans and support women to run their business successfully with the security of finance from financial institutions. By giving a collateral, the value of these loans can be increased further. 
    • The maximum amount that can be applied for is Rs. 50 lakhs with a tenure of 3-5 years. These are provided to agencies which are more than a year old and have valid business and legal proof of their respective establishments. 

 

  • Ownership proof and a current account statement needs to be submitted to prove that the business is profitable. Prepayment option to reduce the burden of interest is also applicable.

 

 

    • Loan Against Securities: Under this method women can pledge a collateral in the form of investments in mutual fund, insurances of various kinds or the stock exchange. 
    • A high value loan can be taken on these investments and can be used in any way to assist the business. These are short term loans for about 4-5 years and the loan needs to be repaid within a fixed period of time. 
    • The amount of loan disbursed is about 60-70% of the total value of securities pledged by the applicant. Sine it is a secured form of loan, the rate of interest is comparatively lower. 

 

  • Also, the eligibility criteria are simplified and easy to apply for. The woman should personally visit a local branch to apply for the loan and submit all minute and relevant details regarding the business and ownership. 

 

 

    • Personal Loan: It is one of the most flexible type of loan for women which can be used for both personal, and professional requirements. 
    • This is an unsecured loan which does not need any kind of security to be pledged. The disbursal of these loans completely depends on the eligibility, income, and credit score of the applicant. 
    • A non-working woman with no professional experience can also apply for the loan but the amount disbursed would be low.

 

  • For a bigger kind of business, the amount of loan can be increased up to Rs. 50 lakhs for up to 5 years with the addition of co-applicants.

 

 

    • Government Schemes: The Government of India has launched various schemes to encourage and motivate women to start and run a business of their own. 
    • There are various women enterprise programs or Mahila Udhyami Yojanas at a minimal interest of 0.25%. 

 

  • Let us take the following example of one of the most important business loans for women provided by the Government. 

 

The Pradhan Mantri Mudra Yojana Scheme for Women:

This is launched by the Government of India for women wanting to start their own tuition centres, parlours, tailoring centres etc. No security required and it has three schemes under this plan:

  • Shishu Loan – Up to Rs 50,000 for new start-ups and businesses.
  • Kishor Loan – Between Rs. 50,000 and Rs. 5 lakhs for well-established businesses.
  • Tarun Loan– Up to Rs. 10 lakhs for expanding the business.

Features of different kinds of loans:

Kinds of Loans Features
  • Small Business Finance
  • A variety of loans available
  • Secured and Unsecured loans available
  • Affordable rate of interest
  • Ideal for short term funding
  • Commercial Business Loan
  • Secured and Unsecured Loans available
  • Loan amount up to Rs. 50 lakhs available
  • Repayment Tenure of 3-5 years
  • Online application and Approval granted
  • Minimal documentation required
  • Loan Against Securities
  • Secured loans only
  • Low rate of Interest and minimal requirements
  • Fast processing and disbursal
  • Loans of up to 75% of the total amount of collateral
  • Flexible option for repayment
  • Personal Loan
  • Freedom to use the loan however the woman wishes.
  • Unsecured Loan
  • Online application
  • Co-applicant facility also available
  • Government Schemes
  • Low rate of interest and low eligibility requirements
  • Variety of loans and schemes available.
  • Many banks and other financial institutions are a part of this scheme
  • Flexible repayment tenure of 5 years.

 

Eligibility Criterion of these Loans:

Different financial organizations have different criteria to look at while disbursing a small business loan to women. A few of the conditions required are as follows:

  • The woman should be above 18 years of age and less than 60 years of age.
  • Woman should have more than 51% share
  • Minimum 6 months of running a successful business
  • 2 years of ITR required for taking a loan of more than Rs. 10 lakhs
  • VAT Returns for the last 12 months are required along with other documents as specified above.
  • Minimum turnover of Rs. 90000 or more in the last three months
  • The firm or business, for which the loan has been applied for, should not be a blacklisted firm or should not carry a poor credit history.
  • Trusts, NGOs and other charitable institutions are not granted these loans.

 

Business finance enables a woman to be economically independent. This also enables more investors and commercial partnerships which can be financially beneficial for the promotion of the woman’s business. These kinds of loans give financial stability to the women and help her extend her financial and social networks contributing to the growth and development of her financial situation and towards the GDP and economy of the nation. This helps her secure a better, independent and much safer work and financial environment for herself and thus become an example and motivate other women to fall in the same bracket.

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