Debt financing is done through raising loans from commercial banks and other sources. In India commercial Banks provide loans to small entrepreneurs as per guidelines issues by the Reserve Bank of India. The loans granted could be either unsecured or secured loans. In case of unsecured loans, the entrepreneur gets the loan as a personal loans mostly based on his credibility and standing. However, the quantum of the unsecured loans is usually smaller as compared to the secured loans.

The secured loans are usually given on securities pledged or hypothecated to the bank. Loans can also be raised against the assets, shres and other market securities. normally loans are classified either as short-term loans or long-term loans. Short-term loans are spread over a period raging form a few moths to one year. Long-term loans are spread over form a period of 3 years to 10 years depending on the type of the loans. Financing for equipment, renovation, etc. are usually spread over three years while loans for equipment, renovation, etc. are usually spread over three years while loans for acquisition of real estate (land, building, industrial shed, etc.)are spread over period ranging form 10 to 20 years.

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