For a long time, women entering a business was almost a social taboo in India. But now the situation is changing rapidly. The government as well as the private sector is now coming up with a host of new opportunities for women to become self-employed. FinTech platforms as well as government banks give loans to women entrepreneurs in rural and urban areas so that they can run their own enterprises.
The active participation of women has revolutionized the Indian economy as well. The MSME sector, with its huge female participation, contributes to about 40% of the GDP of India.
Why are business loans for women necessary?
Demographically, women make up 48% of India’s population, but only 25% of females in India are engaged in economic activities. More women in India need to become financially independent. A major step towards this goal of female empowerment is to create opportunities for women in business through women entrepreneur loans. There are some special features of these business loans for women that make it easier for females to manage a business in a society that still holds some reservations about women’s economic participation.
Special benefits of business loans for women
- The minimum amount for these women entrepreneur loans is Rs 50,000 and the maximum amount is Rs 2 Crores.
- Women can avail collateral-free loans if the required eligibility is met
- The rate of interest for business loans for women vary between 7.8% to 8.1%
- The tenure for these loans can be extended up to 10 years
- Most women entrepreneur loans are fast-tracked through the approval process. On average, it takes 72 hours for the loan to get approved and disbursed to the businesswoman. Some banks even have a 24-hour approval feature for business loans for women.
- The loan repayment deadline is usually within 36 months, but in some cases, it can also go up to 5 years.
- There is also a lot of flexibility in the repayment structure of these business loans. Once the businesswoman has paid her first EMI, she can pay the rest of her loan amount either in instalments or repay it all at once. There is no penalty charged for either of these options.
- Installments for repayments can also be customized according to the preference of the entrepreneur. She can pay her instalments weekly, monthly, or bi-monthly.
- The eligibility criteria for women entrepreneur loans are also very simple. Many banks have different criteria, but a common one is that the business has to have a turnover of Rs 90,000 for 3 months to be eligible for female entrepreneur loans.
Documents necessary to apply for business loans for women
- First and foremost, businesswomen will have to fill up their loan application form with all the necessary required data.
- The business should also have all its KYC documents up to date. The entrepreneur will have to submit the relevant documents like the Business Entity Proof, the Articles of Association, the Shops and Establishment Certificate, the Partnership Deed, and the Incorporation Certificate.
- Next are the financial proofs for the business’s performance. The financial performance records for the current year and a projected turnover for the next year have to be provided for loan approval. The balance sheet of the business and the profit and loss reports are examined to determine the loan value the business is eligible for. Tax audit reports, VAT returns, and audited and provisional financials also must be submitted.
- Bank statements of the business account for the last six months have to be submitted to the bank or the financing organization for approval of any business loans for women
- The PAN card number of the business entity or the business partners or the business proprietors also has to be provided.
- A passport picture of the loan applicant and co-applicant has to be submitted.
- Address proof of the business entity or the proprietors or partners is essential for women entrepreneur loans
Types of Women Entrepreneur Loans
- Small Business Finance- These loans are often called Line of Credit. The maximum credit is fixed, and women can draw the necessary amount within this limit. They will only have to pay interest on the amount of money that they have drawn and not the total approved credit amount.
- Commercial Business Loans- Only medium-scale enterprises with at least a year of operation are eligible for these loans. Women can add collaterals to increase the loan amount available to them. Commercial business loans for women can be approved up to a maximum value of Rs 50 Lakhs.
- Loan Against Securities- These are high-value loans that women entrepreneurs can avail of by putting down as collateral securities like mutual funds, stock market shares, or insurances. These loans usually have a lower rate of interest.
- Personal Loans- These are the easiest business loans for women to get approved and the most flexible. The loan amount depends on the woman entrepreneur’s eligibility, credit score, and income. Even non-working women with no work experience can apply for a personal loan to start their own venture. But the loan amount in such cases is low.
- Government Programmes- There are numerous government schemes to encourage business activities among women. The MahilaUdhyami Yojanas give business loans for women at a floor rate interest of 0.25%. The Pradhan Mantri Mudra Yojana Scheme has been launched recently to encourage females to grow their small ventures like beauty parlours, tailoring shops or tuition classrooms. This scheme has three different kinds of loans. The Shishu Loan for businesses approves up to Rs 50,000. The Kishore Loans for well-established businesses loan out amounts between Rs 50,000 and Rs 5 Lakhs. Tarun Loans are for growing business and approve up to Rs 10 Lakhs for business expansion.
Women entrepreneurs are paving the way for the financial independence of many women in India. They are empowering Indian women to take care of their own and their family’s financial requirements. Easy business loan approvals are just a tool to aid this difficult and noble path of female entrepreneurs.