written by | March 22, 2022

Learn About Getting a Business Loan for Shopkeepers

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Table of Content


Running a shop and ensuring its everlasting sustenance is still a challenge to many Indians. These small groceries, medical, mobiles, garments, and retail shops are vital in a typical Indian life. Opening one such shop is a dream of many, but have you ever thought about the obstacles of starting such a shop? We know that the first thing that comes to your mind right now is the "money factor."

Yes, no shop can be established without investment, and that's the point where many people struggle. Buying a shop, setting it up, doing furniture work, storing all inventory, etc., is pretty money-draining, and there's no escape. If you have enough savings, then thumbs up, but what if you don't? Shall you leave your planning? Certainly not!

Banks offer a helping hand in such situations, but with few criteria. Also, before approaching any bank for a loan for the business shop, you should know all the ins and outs. In the following sections, you will learn all the requirements for acquiring a loan for purchasing a shop.

Did you know?

When you plan to get a loan for a shop opening, you need to consider several aspects. Such as making a detailed business plan, explaining how you will be using the loan you are getting for your shop in your business plan, summarising the objectives of your shop, and clearly expressing the approximate amount you need for each daily operational activity.

All You Should Know About Getting a Loan for Shop Purchase

Assessing the Costs of Opening a New Shop

The amount of money you will need as a loan depends upon how much money is needed to set up a proper shop. It depends on what sort and size of shop you plan to open. If you've already planned, you may have an idea of construction, stock indeed, workforce and so on., costs. Your family members or buddies can be helpful who have already established a similar kind of shop.Inquiry is the key here. Keep on inquiring with the professionals of each department, and keep noting down the potential investment. 

It would resemble something like:

Task

Estimated Amount

Shop buying cost

₹7,00,000

Stock of goods

₹20,000

Furniture work

₹50,000

Manpower for next six months minimum

₹60,000

Business registration and documentation

₹10,000

Additional unexpected costs

₹10,000

Total

₹8,50,000

This was a rough idea on how to calculate your costs. It may vary in your case. In this instance, the initial cost of the rough estimation is ₹8.5 lakh.Considering that figure and personal savings, it becomes easy to figure out how much loan is required for shop financing from the bank. However, remember that you'll get a loan as per the evaluation and estimation did by the bank officials. Your credit score may also help in sanctioning big loan amounts. 

Benefits of Getting a Business Loan for Shop Purchase

There are abundant benefits of getting a loan for a shop opening. Most importantly, such loans are easy and quick to avail of today, but they are also highly customisable.You've got a big army of banks providing business loans for such instances, which means you have many options. Go with the most generous bank, impose fewer interest rates and have flexible terms and conditions. You can choose the most suitable tenure for you, considering your current income, potential income and EMIs.

Also Read: How to Apply for the Best Business Loan in India? - Types of Govt. Loan Schemes

Low-Interest Rates

Due to the fierce competition between the top banks, business loans are available at pretty low-interest rates today. You certainly stay away from tension when you already know that your EMIs won't over-burden you. Some banks even propose interest rates considering applicants' financial records and history. So, the bank already has an idea of how many shop loan interest rates you'd be able to pay comfortably. 

Customizable Tenure

Yes, following the tenure dictated by the banks, isn't required in today's world. Today, you've got the flexibility to choose the most suitable tenure. 

Loan Processing Takes No Time

The availing of business loans was very long and tiring a few years back. With the evolution of the internet, the procedures have changed. You may even get notifications of ads claiming to offer you a loan for a shop opening within 10 minutes. We won't explore the trustworthiness of such offers right now, but we'll talk about the reality. Today, the business loan application process is online, and it's very quick. You can get your loan approved within one day also. 

Fast Disbursal

Earlier, you had to wait days for the loan amount to land in your bank account. Now that disturbing schedules and pannings for sure. Now, the process takes as low as three days, and you can carry on your further tasks straight after. 

Flexible Repayment

If you're more comfortable paying your loan bi-monthly instead of monthly, you can do that! It's very helpful flexibility because if you're able to generate good profit in a short time after establishing your shop, you can repay your loan in less time. 

Eligibility Criteria

Now, here comes another piece of good news. The list of criteria for getting approval for a business loan is very short. Check it once:

  • You should be an Indian citizen.
  • Your age should be 21 plus.
  • Most banks demand a turnover amount in the months before you submit your loan application. 
  • The location of your business shouldn't be in any negative location lists.
  • Your business should be 100% legitimate.

Documents Required

  • You should have identity proof (ration card, PAN card, driving licence, etc.) 
  • Business PAN Card.
  • Your address is proof of your legal documents. 
  • Proprietorship declaration of your business. 
  • Bank statement of last six months.

Also Read: Top 5 Government Loan Schemes for Small Business in India

How Long Is the Process?

As we mentioned earlier, the process isn't as tiring as it used to be. Today, it can be as short as three days. It's your time to know the process of availing of a loan for a shop purchase. 

Step 1: Submitting an Application

If you've already researched the best bank to offer you a business loan, it's time to visit the bank and discuss your requirements with the branch manager. Once you're satisfied with the terms and benefits offered, apply and start the loan request and available process.

You can also choose to do the whole process online. It's as easy as filling in a few vital details about you and your business, uploading photos of your government IDs, and tapping the submit button. The representative will soon contact you for further inquiry, and they'll explain everything about repayment details, interest rates, tenure, etc.

Step 2: Upload Documents

The online application submission process for business loans may vary according to the platform. In some cases, you're asked to upload vital documents while applying only. On the other hand, sometimes you have to input the basic info in the online forms. You'll have to upload the documents only after the representative contacts you in such a case. These documents will undergo analysis. You'll soon get a notification or a call from the bank regarding the approval of your loan if everything goes right. 

Step 3: Disbursal

After completion of the previous two processes, the third step, disbursal, won't take much time. You'll receive the loan amount right in your bank account with most banks within three days. You don't have to wait for any period to withdraw the amount now.

Conclusion

In older days, the chance of getting a loan approved for opening a shop was considered a matter of luck. Now, the situation is a hundred times easier. Government is supportive of small business people. Also, banks are much more generous than they ever used to be.

Calculating your expecting income and considering your financial conditions, you can avail of a loan for shop purchase in no time, following the right process. Don't forget the "repay" factor by getting too tangled up in your shop-related planning.

Follow Khatabook for the latest updates, news blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounting.

FAQs

Q: Can I take help from a business loan for anything?

Ans:

You can use your business loan for working capital or buying fixtures, machinery, inventory, supplies, equipment, or furniture, but you can't use the loan funds to pay your existing debts. You can't buy real estate either with the business loan money.

Q: What is the role of credit score in business loan approval?

Ans:

Your credit score reflects your financial conditions in recent times. A good credit score gives the lender bank confidence in giving you business loans. In short, the bank feels more secure that you'll be able to repay the loan amount comfortably.

Q: How can I speed up my shop's business loan approval process?

Ans:

The approval process for business loans is already quick enough, and there's no method to speed it up further. Your loan will be delayed if you enter the wrong details during the process.

Q: What tenure options are available for loan for new shop opening?

Ans:

Loan tenure options vary from lender to lender. The maximum repayment tenure is 36 months in most cases. You can contact the bank's representative to confirm the same.

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.