Home Loan For Small Business Owners

March 07, 2023

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Many lending institutions offer Home loan for small business owners in India. One can apply for a loan from a bank or a non-banking financial company (NBFC) that provides home loans to small business owners. To qualify for a loan, you must provide documents such as your personal and business income tax returns, bank statements, proof of business ownership, and other documents demonstrating your ability to repay the loan. It is advisable to compare the interest rates, eligibility criteria, and other features of different home loan products before choosing a home loan for small business owners. The loan amount offered for home loans is subject to various factors, and the interest rate is determined after computing an applicant’s credit history.

Top 10 Home Loans for Small Business Owners

The following table showcases the top ten home loans for Small Business Owners in India.

Banks Up to Rs. 30 Lakh Above Rs. 30 Lakh to Rs. 75 Lakh Above Rs. 75 Lakh
SBI 8.85% – 9.75% 8.85% – 9.65% 8.85% – 9.65%
HDFC 8.45% – 10.35% 8.45% – 10.60% 8.45% – 10.70%
LIC Housing Finance 8.65% – 10.10% 8.65% – 10.30% 8.65% – 10.50%
ICICI Bank 9.00%-9.80% 9.00%-9.95% 9.00%-10.05%
Kotak Mahindra Bank 8.85% onwards 8.85% onwards 8.85% onwards
PNB Housing Finance 8.50% – 14.50% 8.50% – 13.00% 8.50%-10.85%
Bank of Baroda 8.90% – 10.65% 8.90% – 10.65% 8.90% – 10.90%
Union Bank of India 8.85% – 10.75% 8.85% – 10.95% 8.85% – 10.95%
IDFC First Bank 8.85% onwards 8.85% onwards 8.85% onwards
Federal Bank 8.60%-10.20% 8.60%-10.25% 8.60%-10.30%

Eligibility Criteria for Small Business Owners

Home Loan for Small Business Owners is applicable upon fulfilling the following eligibility criteria.

  • The individual must be a business owner with at least two years of experience in their current business.
  • The individual must have a good credit history and must be able to provide sufficient proof of income to demonstrate their ability to repay the loan.
  • The individual must have enough equity in their business or other assets to serve as collateral for the loan.
  • The individual must provide adequate time for the loan application and approval process.
  • The individual must demonstrate that the loan proceeds will be used for legitimate business purposes.

Types of Small Business Owners in India

Small business owners or self-employed can be categorized into two categories:

Self-employed Professionals: individuals who provide professional services to their clients. For example, doctors, engineers, lawyers, and CAs.

Self-employed non-professionals: refer to small business owners who offer products or services to their customers.

Documents Required for Small Business Owners.

Home loans for Small Business Owners can be availed once interested applicants maintain a list of certain documents. To conclude the process, one must submit a self-attested copy of the following documents and the loan application.

Identity Proof: Aadhaar Card, Voter ID Card, Passport.

Proof of Residence: Passport, Voter ID Card, Aadhaar Card and Bank Account, Property Tax Statement, Utility Bills
Proof Of Income: PAN Card, TAN Card, Current account statements, and IT Returns.

Certified Financials: Profit and Loss Account Statement and Balance Sheet.

Property-Related Documents: Copy of Purchase Agreement

Repayment Terms

The applicant must honour the following repayment terms and conditions established by the bank.

Tenure of Loan

The banks predetermine the tenure of the loan. A home loan for small business owners can stretch up to 30 years, spreading out the repayments amount. However, the term can be up to 20 years if the interest rate is fixed.

Loan Amount

The loan amount offered to the applicant would be subject to several factors, such as repayment capacity, age, and property type. The market valuation of the property is accounted for to determine the LTV Ratio. Generally, the LTV ratio offered by the banks is as follows:

Property Cost LTV
Upto Rs 30 Lakhs 90% of the Market Value
Rs 30 Lakhs to Rs 75 Lakhs 80% of the market value
Above Rs 75 Lakhs 75% of the market value

How to Apply for a Home Loan for Small Business Owners?

Small Business Owners in India can apply for a home loan through a bank or a Non-Banking Financial Company (NBFC).

Banks typically require self-employed individuals to submit their income tax returns and other documents to prove their income. Additional documents required may include bank statements, financial statements, and proof of identity and address. S

Some banks also offer special home loan packages for self-employed individuals. The government also provides special schemes for self-employed individuals to apply for home loans, such as the Pradhan Mantri Awas Yojana (PMAY) scheme.

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