What is a Business Loan?

A business loan is a type of loan that is specifically used to help businesses grow, manage cash flow, make big purchases, or simply meet their everyday running costs and needs. 

So why do Nepalese businesses take out business loans? 

Well starting or running a business often requires more funding than you might have stashed in your business bank account, which is why business loans can be a handy way to help grow and run your business.

Some of the popular ways that businesses use loans in Nepal include:

• Paying wages

• Hiring new staff

• Purchasing stock

• Paying invoices

• Buying new equipment

• Funding growth

Which banks offer quality business loan interest rates?

When you are looking for a business loan whether for start-up financing, to fund a new initiative, or grow your company, you will want to find the best possible business loan in terms of interest, processing fees, etc. Sapati Sewa helps you to quickly compare business loans from the products offered by the various banks and financial institutions.

How to compare and apply for a business loan?

When you are looking for the best business loans offered by the various banks and financial institutions, you need to check the applicable rates and fees on the corresponding business loans.

Here are some of the key elements you need to check before applying for business loans.

Rates and fees:

As we mentioned above, you have to check whether the interest rate calculated by the banks and financial institutions is per fortnight, per month, or per annum when comparing the deals. 

The other cost you need to compare are mentioned herein:  

• Application fees: This is a fee you will be charged at the start of your loan which can either be fixed amount or a percentage of the loan amount

• Ongoing fees: This is also known as a service fee which can be charged on a weekly, monthly or annual basis    

• Early repayment fees: Some banks and financial institutions will charge you an early repayment fee for the privilege of paying off your loan early

• Dishonor fees: A dishonor fee may be charged if a due payment isn’t able to be processed because of a lack of funds in your account

• Discharge fees: Some banks and financial institutions will charge a discharge fee once your loan is fully paid off, or in the event that you refinance your loan

How can I apply for a business loan?

Once you have found the right lending financial institution for your business, you need to furnish certain documents as required by the banks and financial institutions which have been mentioned herein:

• Declaration of existing credit facilities enjoyed from any  financial institutions (if any)

• The requirement for a credit facility and its business justification

• Future business plans

• Details of securities offered against the credit facility

• A construction completion certificate from a competent authority in case if the building is offered as collateral security

• The past two years audited financial statements with the next three years' projections.

• Projected financial statements for start-ups and new businesses (less than two years old)

• Certificate of Firm/Company registration

• PAN / VAT registration certificate

• Memorandum and Articles of Association

• Tax paid receipt of last financial year

• Copy of land registration certificate proposed for security

• Insurance policies and premium paid receipts of assets

Business Loan eligibility:

Before you apply for a business loan, you need to meet some minimum requirements in order to be eligible for a business loan which has been mentioned herein:

• Time in business: Banks and financial institutions will often require your business to have been in operation for a certain period of time before offering you a business loan.

• Annual turnover: Banks and financial institutions require a minimum annual turnover of a business to ensure timely repayment of the business loan. 

• Personal and business records: Banks and financial institutions often check the personal and business record to check the creditworthiness and track record of previous dues with financial institutions.

• Outstanding tax: Banks and financial institutions often check whether the tax dues have been paid or not before offering a business loan.