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About Professional Loan

When you start your own business, you have lots of dreams and a big vision. A vision to see your business grow, to have the best clientele, to expand the business and to make a mark for yourself as a professional. But sometimes these goals seem to become lost under financial constraints. Expansion of business requires adequate capital and sound financial planning. But despite your best efforts to arrange finances, there may still be a shortfall. One of the solutions to this is a professional Loan. If you are a Chartered Accountant, Doctor, Writer, Photographer, and Management Consultant or belong to any profession, you will need to avail professional loan for expansion of your services.

As a professional, you possess the necessary skills and expertise to set up your own business. Being self-employed is a boon and you need funds to excel in your profession. The professional loan can be availed for buying new equipment, purchasing a new office, improving working capital, training the staff, installing the latest software or towards a marketing campaign. Mostly the professional loans are offered by Government Banks but there are many private banks and NBFCs which offer a professional loan.

Professional Loan
Professional Loan

Features of Professional Loans

  • The features of professional loans differ across each bank. Some of the latest features that can be seen across the private banks are:
  • The professional Loans can start from a few lakhs to an amount as huge as Rs 2 crores.
  • There is no mandatory requirement of security or collateral. However, some banks may demand it.
  • The tenure of the loan extends up to 5 years
  • The rate of interest and the loan amount depends on the nature of the profession or the business. For e.g. Doctors, Chartered Accountants, CS, CWA, etc.
  • The professional loan can be used for any purpose such as working capital requirement, purchase of equipment, office renovation, etc.
  • The repayment of the loan is extremely flexible. You can choose to repay the loan through EMIs, Post-dated cheques, or through an ECS Mandate.
  • Many banks offer professional loans on separate terms and conditions for Business with audited financials and business with no formal books of accounts.
  • Certain business-related travel expenses such as airfare, accommodation, seminar fees, etc. can also be financed through professional loans
  • Usually, the loan is disbursed in bulk to the owner of the business. However, in some cases, the payment can be directly made to the suppliers

What is the purpose of Professional Loans?

Professional Loans are a part of growing the business. Whether you have just started off as an entrepreneur, already have funds from investors or are operating from your savings, a professional loan is inevitable at some or the other point in life. Borrowing money for business definitely involves a certain level of risk. Hence, you need to be very mindful and discrete about why you would take a business loan. 

Some of the main reasons for taking a Business Loan are:

Buying a new office or area for conducting your business :

One of the most important reasons to avail professional Loan is to purchase real estate to expand the business operations. You may have started your operations on a small scale with few employees and equipment. However, with the passage of time, your business and clientele grow, and you would want a more formal set up for your professional activities.  

Purchase of equipment :

For any business, especially in engineering or something involving mechanics, you must have the latest equipment. It can also be for new software if the business is IT or knowledge-based. This not only ensures smooth functioning but also offers operations of scale. The latest equipment with cutting-edge technology makes operations quicker, enhances efficiency and reduces the turnaround time. This equipment could be expensive and requires strong fund support.

To increase working capital :

Liquidity is the lifeblood of business especially if the business is a small or medium scale enterprise. To ensure smooth operation and availability to capital to meet the day to day requirement, one must have enough working capital. You can also avail loan for profession for the purpose of working capital.

Undergoing a professional course :

This is an age of cut-throat competition and you need to constantly update yourself to stay ahead of the game. There are several professional courses which teach about new and better ways to conduct your business. However, since these are advanced professional courses, they usually have more fees. A professional loan can be instrumental in financing any training required for yourself or your staff.

What are the eligibility criteria for Professional loan?

The eligibility criteria for professional loans is very straightforward:

  • Individuals in the age group of 18 to 65 years.
  • People who are already practicing their professions as per licenses issued by the state or central legislation.
  • Copy of professional certificate denoting that they practice the said profession.
  • Professionals with a diploma/degree certifying their qualification in the capacity of lawyers, engineers, software engineers, journalists, chartered accountants, management consultants, etc.
  • Individuals, partnership companies, firms, and proprietorships can also apply for this type of loan.

Documents required to apply for a professional loan

  • There is minimal documentation requirement for professional loans. You would require submitting certain proofs related to your profession.
  • Membership certificate which is issued by the respective professional authorities in that regard.
  • Income statements for the last 3 fiscal years, audited financial statements or income tax returns for the last three years.

Frequently Asked Questions: Professional Loan

1. What is the purpose of a professional loan?

A professional loan is required for many purposes such as purchasing new equipment, renovation of old office, installing new software, meeting working Capital requirements and many other.

2. What is the tenure for which I can avail professional loan?

You can avail professional loan for about a period of 5-7 years. However, the tenure of the loan varies from bank to bank.

3. What is the amount of loan that I can avail as a professional loan?

Most of the banks will have a maximum limit on the number of professional loans. This amount may vary across banks. The amount is decided by the credit team based on the repayment capacity, disposable income and the purpose of the loan.

4. Is professional loan a secured loan?

A professional loan can be secured or unsecured loan. There are some banks which may ask for collateral, while there are some which may offer loan without collateral or guarantor.

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