written by khatabook | November 14, 2022

How to Get Business Loans for OPC Company? Check Eligibility & Application

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Table of Content


A business loan for an OPC company is a loan given to a business owned by a single person. This loan can be used for various purposes, such as expanding the business, buying new equipment, or working capital. The loan can be secured or unsecured, depending on the borrower's creditworthiness. The interest rate on a business loan for an one person company or OPC will vary depending on the lender, but it is typically lower than the interest rate on a personal loan.

Did You Know? In India, an OPC company can avail of a business loan of up to ₹10 lakhs from leading banks and NBFCs. The interest rate on such loans starts from as low as 11.69% per annum.

What is an OPC company?

An OPC company is defined under section 2(62) of the Companies Act 2013 as a company that has only one person as its member. It is a type of sole proprietorship whereby the sole proprietor is the only company member.

Under the Companies Act 2013, an OPC is a separate legal entity with perpetual succession that must be registered by the Companies Act 2013. In contrast to a single proprietorship, which is not a distinct legal entity, the duty to repay the loan obtained by the OPC is restricted exclusively to the OPC, making the sole proprietor personally accountable for any loan or credit facility obtained. A sole proprietorship does not need to be registered.

The main advantage of an OPC company is that it requires only one person to form the company, which is much simpler than a traditional company. Additionally, an OPC company does not require a minimum paid-up capital, which makes it more accessible for small businesses. The main disadvantage of an OPC company is that the sole proprietor has unlimited liability, meaning that they are personally responsible for all debts and liabilities of the company.

Also Read: Government Loan Schemes for Small Businesses In India

How to Apply for a Business Loan as an OPC?

If you’re considering starting a business, you may wonder how to apply for a business loan as an OPC (one-person company). Here are a few things to keep in mind:

  • First, remember that as an OPC, you are considered a high-risk borrower, meaning you may have to pay a higher interest rate than other borrowers.
  • Second, don’t be discouraged if you’re turned down for a loan by one lender. It’s not uncommon for small businesses to be rejected by several banks before they find one willing to lend them money.
  • Third, try to get a personal loan from a friend or family member before you turn to a bank. This way, you won’t have to worry about paying the loan with interest.
  • Fourth, consider using a business credit card instead of a business loan. This can be a good option if you only need a small amount of money and can pay off the balance quickly.
  • Finally, don’t forget to shop around and compare interest rates before you choose a lender. This way, you’ll be sure to get the best deal possible.

Qualifying for a Business Loan as an OPC

There are a few things that you need to take into account when you are trying to qualify for a business loan as an OPC. The first is your business plan. It would help if you had a well-developed business plan outlining your business goals and how you plan to achieve them. This will show the lender that you are serious about your business and have the plan to make it successful.

Another important factor is your credit score. Lenders will want to see that you have an excellent personal credit score to qualify you for a loan, which shows them that you are responsible for your finances and can repay the loan.

Finally, you will need collateral to qualify for a business loan. This can be in the form of property, equipment, or even inventory. Having collateral will show the lender that you are serious about your business and can repay the loan.

Also Read: A Guide to Stand Up India Scheme

The Best Business Loans for OPCs

An OPC, or Person Company, is a type of business entity in which there is only one owner. Because there is only one owner, OPCs are relatively easy to set up and maintain. However, because there is only a single one, OPCs can be somewhat risky.

The best business loans for OPCs are relatively low-risk and have low-interest rates. The best way to find such loans is to shop around and compare offers from different lenders. It is also essential to read the terms and conditions before taking out a loan.

One of the best options for OPCs is a business credit card. Business credit cards typically have low-interest rates and offer a variety of perks, such as cashback or rewards points. Another option is a personal loan. Personal loans usually have lower interest rates than business loans, but they may be available in a smaller amount.

OPCs should also consider government-backed loans, such as those offered by the Small Business Administration (SBA). These loans typically have low-interest rates and flexible repayment terms. However, they may be more challenging to qualify for than other types of loans.

Ultimately, the best loan for an OPC will depend on the individual circumstances of the business. OPCs should compare offers from multiple lenders and carefully read the terms and conditions before taking out a loan.

Eligibility Criteria for Business Loans for One Person Company

There are a few eligibility criteria that an OPC company must meet to be eligible for a business loan. These are:

1. The OPC company must be registered with the Registrar of Companies (ROC).

2. The company must have a minimum paid-up capital of ₹1 lakh.

3. It must have a minimum turnover of ₹5 lakhs.

4. The OPC firm must have a good credit history.

5. It must have a sound business plan.

Also Read: What is Net Working Capital: See Definition and Importance

Documents required for a Business Loan for an OPC Company

1. The business plan is the first and foremost document required for an OPC company business loan. The business plan should include detailed financial projections for the company and should be approved by the company’s directors.

2. The second document required is the company’s financial statements for the last two years. The lender will use these statements to assess the financial health of the company and its ability to repay the loan.

3. The third document required is a personal guarantee from the company's directors. This guarantee ensures that the directors will personally repay the loan if the company cannot do so.

4. The fourth document required is a list of the company’s assets and liabilities. The lender will use this information to determine the value of the collateral that can be used to secure the loan.

 5. The fifth and final document required is a copy of the company’s Articles of Association. This document outlines the company’s legal structure and governance rules. 

Conclusion

There are several crucial factors to consider when taking out a business loan for an OPC company. The company's financial stability and creditworthiness are two of the most important factors lenders will consider when considering a loan. The size of the loan and the company's ability to repay it are also important considerations.

Shopping around and comparing loan offers from various lenders before selecting one is essential. Before deciding, consider interest rates, fees, and repayment terms. It is also necessary to read the fine print and understand all the terms and conditions of the loan before signing anything.

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FAQs

Q: What are the documents required for a business loan for an OPC company?

Ans:

The documents required for a business loan for an OPC company include the following:

  • The company's registration certificate.
  • The company's Articles of Association.
  • The company's latest financial statements.
  • The director's KYC documents.

Q: Is OPC preferable to sole proprietorship?

Ans:

The OPC is ideal for people who want to start a business with a corporate structure while maintaining effective control over all business operations. You can grow the business while maintaining limited liability.

Q: Can we take a loan in OPC?

Ans:

Another advantage of an OPC is the simplicity of obtaining loans and the infinity. "OPCs offer enterprises with perpetual succession and limited liability." They also give the firm transparency and a distinct identity, which is advantageous regarding money-raising and business development.

Q: How is OPC taxed?

Ans:

OPC would have to pay a 30% tax on all profits. There are no exemptions.

Q: What is the minimum capital requirement for OPC?

Ans:

There is no required minimum capital to establish an OPC Private Limited Company. So, even with no registered capital, an OPC can be formed and begin operations.

Additionally, When a private business is converted into an OPC, its paid-up share capital cannot be greater than fifty lakh rupees, nor can its average annual turnover be greater than two crore rupees.

Q: Can OPC be registered as an MSME?

Ans:

Through the Udyam registration portal, any Person Company (OPC) enterprise can complete the MSME online registration process.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.