Why is It Better to Opt for Pre-Approved Business Loans in India?

Updated on: 14 Dec 2021 // 23 min read // Business Loans
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Not all business people have access to unlimited funds, and there can be many limitations attached with self-funding an ambitious commercial project. If you’re a businessman in need of working capital to fund purchases pertaining to office space, machinery, equipment, marketing initiatives or production capacity, hiring competitive staff and more, you certainly need assistance in the form of additional funding. Well, this is precisely where the pre – approved Business Loans can make your life a whole lot easier.

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What are pre-approved Business Loans? 

Pre-approved Business Loans, as the name suggests, are Business Loans which make you eligible for a loan in advance, i.e., the bank approves a loan amount before you apply for the same. These loans are mostly offered to individuals who have a robust existing relationship with their banks or Non-Banking Financial Company (NBFC). The relationship could be in the form of loans, salary accounts, Credit Cards, or any other financial service or product.

As this is a pre-approved loan product for the existing customer of the bank, the lender already possesses the relevant details and documents of the prospective borrower. Thus, the application process for pre-approved Business Loans in India is relatively swifter and less cumbersome.

They are usually sanctioned within no time and have attractive rates of interest which are sometimes lower than what regular loan products have to offer.

Eligibility Criteria

More often than not, your eligibility will be analysed by the financial institution before you’re offered a pre-approved loan. Your past credit record with the bank will be one of the key determinants in that regard.

For instance, if you are offered SBI Business Loan, and you have an existing Salary Account with the bank, your income and cash flow will already be checked. Similarly, in the event you hold a Credit Card, your payment history will be considered. Additionally, to avail a Business Loan, the following list of criteria would also be assessed:

  • The applicant’ age should range from 25 years to 55 years old.
  • The business for which the loan is being sought should be at least three years’ old.
  • Income Tax Returns (ITR) should have been filed for at least one year.

The minimal documentation requisites are:

  • KYC Documents
  • Business Registration Certificate or other solid proof that validates the business’s existence
  • Relevant financial documents
  • Previous month’s bank account statements
  • Passport size photographs of the applicant

In addition to these documents requiring to be validated, lenders often check the CIBIL report to verify the credit history of the applicant. Furthermore, the lending organization will also check if there’s any existing loan on the applicant’s account and thereon, proceed to deduct that amount while calculating the approval limit.

In case of a secured pre-approved Business Loan, lenders will also do an asset quality check in addition to verifying if you meet the above-mentioned criteria. Whatever asset you might intend to purchase – be it equipment or property– will be verified. Accordingly, your loan will be sanctioned and disbursed basis the eligibility parameters and due diligence guidelines of the bank.

A processing fee might also be charged on the pre-approved loan, which is adjusted during the final loan disbursement. Once the evaluation process is completed, the lender will issue an approval letter notifying you of the loan amount that can be disbursed to you. It needs to be mentioned that the sanction is valid only for six months– depending on the lending institution– following which a fresh approval must be sought. Further, it should be mentioned that the processing fee will also not be refunded in any given case.

How are pre-approved Business Loans beneficial?

Depending on your eligibility, you have the option of choosing the tenure of the loan which can thereon be utilized as and when required. Whether you need to meet short-term expenses or you are looking to expand your business and need a larger amount; you can get the flexibility to choose the tenure as per your needs. In some cases, you only pay interest on the amount you actually utilized and repay the principal at the end of the tenure.

Pre-approved Business Loans including Tata Capital Business Loan come packed with attractive & competitive interest rates. Not only are the interest rates reasonable but it also comes with flexible repayment options that suit your precise needs and requirements.

One of the primary benefits of getting a pre-approved loan is that you can avail it with minimal documentation. Unsecured loans can be availed without the need for collateral, guarantor or security either. Since most of the verification is done during the pre-approval stage, financial institutions usually disburse the loan pretty quickly.

When you deal with premium bank products such as SBI, you enjoy access to your loan account anytime and anywhere via your online account, which ensures unparalleled convenience.

Pre-approved loans can put you in a position of better control over future negotiations. When you get preapproved, you will be in a better position to negotiate with any vendor before buying any equipment, property or assets.  With a sanction letter in hand, you will be taken more seriously and even given a quote which is customized as per your preferences and your situation vis-à-vis other prospective buyers.

The Bottom Line

While a pre-approved Business Loan might not be very different than a standard loan in terms of features, they surely have their own set of benefits and can inject you with the financial impetus to make your business dreams come true.

Also Read: Top 10 Small Business Loans in India

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