How can self-employed individuals use a personal loan to grow business?

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Self-employed individuals managing a business often look for short-term funds to boost or enhance business operations. In this context, entrepreneurs do not usually wish to indulge in long-term financial commitments like secured loans. Opting for unsecured loans like personal loans for self-employed is thus, a safer option in this aspect. The risk factor in this option is substantially lesser as the borrower need not place property/ asset as collateral or security to avail the funds.

Planning business expansion at the right time is extremely necessary for the long-term success of the firm. It is upon the entrepreneur to assess the expenses required to grow a business. This will ensure acquiring sufficient funds and executing business expansion in a systematic way.

Personal loan for self-employed individuals assists them to plan their business expansions with adequate finance. This might include expanding a business to another city, increasing workforce, upgrading equipment, and so on. Personal loans for self-employed individuals can be utilised for business purposes such as maintaining working capital, improving warehouse efficiency, purchasing machinery, paying bills, etc. Such unsecured loans are also a great option for businessmen to consolidate outstanding debts.

Eligibility criteria to avail a personal loan for self-employed individuals

Since these loans are unsecured in nature, the eligibility criteria set by the lenders are generally easy and simple to meet.

The list of eligibility criteria to avail a personal loan for self-employed individuals includes-

• Applicants must not be below 22 or above 55 years of age
• Applicants must be able to prove at least 3 years of business existence
• He/she must submit the necessary documents for verification of details

Along with this, one crucial eligibility condition that is often taken into account by borrowers is his/her CIBIL score. CIBIL score or credit score is an indicator of the creditworthiness of an applicant. A score above 750 is usually considered favourable to avail a personal loan for self-employed at the most beneficial loan terms.

Documents required while applying for a personal loan for self-employed

In order to verify the details entered by an applicant and determine his/her eligibility to avail a loan, the lender asks him/her to submit certain documents. These usually include -

• KYC documents, including Aadhaar card, voter identity card, passport, driving license, PAN card, etc.
• Proof of business existence in the form registration certificate or any such valid documents.
• Income tax returns filed for the preceding year.
• Passport-size photographs.
• Other relevant financial documents in case of business enterprises whose turnover is above Rs.1 crore.

Most financial institutions provide customers with the facility of applying for a loan online. In such cases, an applicant can access the online portal of the lender and fill up the application form along with uploading scanned copies of the required documents.

Business owners often look for immediate access to funds, so that plans of revamping a business can be executed straight away. Reputed non-banking financial companies disburse personal loans for self-employed within 24 hours of application.

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