हिंदी में पढ़े
Table of Contents :
Commercial loans are usually short-term finance that companies avail to fund their unexpected operations costs and capital expenditures. In the early stages of a business, there come various opportunities when you get the chance for inorganic growth but pursuing them would require considerable capital. Moreover, a progressing business has many expenses. In all these scenarios, a commercial loan can be a great monetary source to support your business.
Eligibility for Applying for Commercial Loans
- Age Criteria: Minimum 21 years and Maximum 65 years
- Minimum Annual Turnover: To be defined by the lender
- Business vintage: Minimum 5 years (in profit)
- Startups need to provide projections of income for the next 5 years
- Business should not be listed in a negative area or location
- NGOs, Trusts, Co-operative Societies, and Charitable organizations are not eligible for commercial loans
Also Know: Which bank has the lowest interest rate on business loan?
Eligible Entities
The following entities are eligible for commercial loans, such as Public or Private Limited Company, Partnership Firm, Sole Proprietorship, and Limited Liability Partnership.
Best SME/MSME Loan offers are just a click away Apply Now
Documents Required for Loan Application
The documents required for commercial loans vary from one lender to another. However, a few documents that are commonly required by lending institutions are as follows:
Identification Proofs (As per the financier’s terms):
- Driving License
- Original PAN Card
- Valid Passport
- Voter’s ID Card
- Aadhaar Card
Address Proof:
- Passport
- Ration Card
- Telephone Bill
- Electricity Bill
Proof of Business (as applicable):
- VAT and GST statements
- Balance Sheet
- Income Tax Returns for a specified period
- Profit and Loss statements
- Bank statements
- Proof of continuation in business
- Certified copy of Partnership deed
- Sole proprietorship declaration
- Board Resolution
- Certified true copy of memorandum and articles of association
Best Working Capital Loan offers are just a click away Apply Now
Processing fees & charges
Common processing fees include amortization fees, cheque swapping fees, incidental charges, cheque bouncing charges, late payment charges, pre-payment charges, stamp duty, etc. Processing fees depend on financier policies.
Commercial Loan Interest Rates
Loans provided today are based on the terms of Marginal Cost-based Lending Rate (MCLR) and Repo Rate-based Lending Rate (RRLR), which are reset periodically depending on the economic rate. Commercial business loan interest rates can vary depending on the risk assessment by the lender and other norms specified by regulations. There are also loan processing fees, legal charges, late payments fees, and other costs laid down in the loan agreement.
Commercial loan interest rates depend on a host of parameters that includes the lending institution, security offered, turnover of the company, profitability, cash flows, creditworthiness of the borrower, etc. Commercial loans are offered for startups, MSME, small businesses, etc.
Get Business Loan with Minimum Documentation Apply Now
Benefits
1. Expanding of Business
Small businesses which have a business model already established with a decent history of transactions can avail the commercial loans to prepare themselves for their next phase of business expansion. Whether they want to expand it across new locations or reach out to a new target audience, these loans would help them make their operations smooth.
2. New Technology and Tools
Small businesses that are looking to purchase new equipment and machinery for carrying out their operations can avail the equipment loan. Banks offer commercial loans especially for purchasing new and costlier equipment which can help businesses in increasing their productivity and giving them a competitive edge.
3. Managing Inventory
When taking up big business orders, especially from manufacturing companies, companies require readily usable raw materials. Commercial loans can prove to be beneficial in such situations and help businesses to buy essential inventory at right time.
4. Raising Working Capital
Maintaining a working capital is crucial to meet all the daily requirements of cash and expenditures to be able to sustain in the market. Commercial loans help in making a perfect balance between keeping liquid cash for daily operations and meeting unforeseen expenditures.
Also Read: Popular Funding Options to Raise Capital for Small Businesses
Appy for Business Loan starting @ low interest rate Apply Now
Types of Commercial Loans
Commercial loans can also be classified based on the kind of specific facilities and benefits that they offer:
Bank Overdraft Facility – The Bank Overdraft Facility is generally considered to be a short-term loan or more generally, a source of short-term funding that is possible to be returned in the subsequent deposit. This facility allows a commercial enterprise to withdraw funds that are greater than that which is available in the company’s account.
Letter of Credit – A Letter of Credit is a document provided by a financing institution to a customer or trading party that is located in a foreign country. The letter is issued to the seller on the condition that he/she/the commercial enterprise provides certain documents that confirm that payments will be made parallel to the delivery of goods.
Bank Guarantee – Unlike the Letter of Credit, a bank guarantee is a facility that is provided to the customer of said financing institution if he/she fails to ‘pay up. The guarantees a specified sum of money that will be paid to the third party within the limited validity period of the guarantee.
Lease Finance – Lease financing is a kind of secured loan that is offered by the financier without the customer having to completely relinquish his/her rights over the asset collateral. Lease financing is then a method that allows the customer or the lessee to make use of assets while simultaneously, the financier gains legal ownership over the assets and could recover a large portion of the assets with additional gains in terms of interest.
SME Collateral Free Loan – As the name suggests, these loans are made available for SMEs and are collateral-free. While small retailers are not eligible for these types of loans, it can be availed by start-up SMEs.
Construction Equipment Loan – Construction Equipment Loans have secured loans where the equipment itself is the collateral and the repayment period varies from 12 to 60 months depending on the repayment capacity. These loans are commonly used to procure equipment like excavators, loaders, cranes, technologically high-end equipment, etc.
SME Credit Card – The SME credit card loan can be availed as cash credit or a term loan up to a sum of 10 lakhs. The repayment period for term loans is typically 5 years and Cash credit can be repaid in 10 years. SME credit card loans are commonly made available for small retailers, smaller-scale business enterprises, small industries, and transport businesses.
Commercial Vehicle Loans – Commercial Vehicle Loans are generally made available to companies with more than 2 years of experience in a business enterprise with dedicated customers, transporters, and owning at least 2 commercial vehicles.
Related Post: