Corporate Loans – Everything To Understand
When an operating business needs more funding, it applies for a corporate loan. The loan it receives can be useful for the following requirements:
- To take care of daily expenditure
- To renovate the firm
- To fund the working capital
- To expand your market
Secured and Unsecured Loans
As you know, a corporate loan can either be secured or unsecured. Secured loans require that you provide collateral. It helps the lender sell the asset you offered to repay the loan if you fail in this regard. Going for this loan enables you to get lower interest rates and more extended repayment periods.
An unsecured loan, on the other hand, does not require that you submit any security. Disbursal of such loans is generally for immediate or short-term funding requirements. But you need to have a high credit rating to avail an unsecured corporate loan.
Types of Corporate Loans in India
There are eight common types of corporate loans in India. They are as follows.
1. Term corporate business loans
You can use the available funding from corporate term loan for anything you want. Either for infusing working capital, purchasing-renovating machinery or property, buying equipment, or upgrading technology. Interest rates can either be fixed or floating. However, it is a fixed loan repayment term. It is three years for a secured corporate loan and up to 15 years for its unsecured variant.
2. Corporate loan against securities
This loan is for those investing in financial securities like mutual funds, insurance, bonds, and exchange-traded funds or fixed maturity plans. All you need to do is to pledge your security. The loan repayment term gets renewed every year.
3. Overdraft facilities
These facilities allow business owners to debit their accounts below 0. Every bank will have a pre-determined limit of the available amount. It varies depending on the type of security you have pledged. You pay interest only on the amount used. But the bank holds the right to repay your loan on short notice.
4. Cash credit facility
It is a type of corporate loan where you receive money for your business assets like inventory or receivables. The amount allowed to withdraw is up to 70% of the value of the asset submitted. And the repayment term gets renew every 12 months.
Here, the bank gives a letter of recommendation to the lender in question. It attests to the evaluation that you will pay on time. If you fail, the bank will repay your loan provided you fulfill their conditions.
5. Channel financing
Channel financing is perhaps the latest entry among the types of corporate loans in India. Here, you get a chance to strengthen your network of distributors. The loan ensures that your distributors get the funding required to buy equipment and other items. The design of the repayment schedule is as per the needs of the borrower.
6. Working capital GST corporate loan
This loan gives you instant access to funding when in need of quick cash. The amazing thing about GST loan is that it eliminates paperwork. The fund available is determined based on your GST return.
7. Drop-line overdraft facility
Individual lenders even offer drop-line overdraft facility. Here, the lender deposits the loan amount in a separate account. It is done to ease corporate loan interest rates. You pay interest only for the amount of the loan used.
How to get a corporate loan?
You evaluated your requirements, know the process well, and are determined to move forward. Next comes the corporate loan application. You can choose one from among the following four methods.
- Visit Lendingkart’s website
- Fill in your basic details and get your loan eligibility checked in just a few seconds
- Get a fair loan offer once your application gets evaluated.
- The funds will be disbursed in your account in as soon as 3 days, which you can use to grow your business.
Corporate loans India eligibility requirements
The following table explains the standard eligibility requirements for corporate business loans.
Income Tax Return
Should have filed an income tax return for at least one year; banks may require you to provide two ITR files
Your bank statements of the previous six months give the lender an idea of your track record
10000000; certain lenders allow exemptions
The history and track record of your business
Documents required for corporate loans India
Documents required to acquire corporate loans vary from lender to lender. Here are the ones that are common to all.
- Proof of identity: Aadhar card, driving license, etc.
- PAN card
- Proof of address: Voters ID, Aadhar card, etc.
- Proof of continuation of business: Income tax return files, establishment certificate, etc.
- Bank statements of six months
- The latest bank statement, along with the total income, profit, and loss account and balance sheet for the previous two years. This statement has to be audited by a certified chartered accountant.
- Other documents: Certified copies of the memorandum of association & articles of association and the declaration of sole ownership.
Corporate loan repayment terms depend on the sole discretion of your lender. While some restrict it to 12-48 months, others offer tenure of five years. Extended repayment options allow the borrower to expand his/her venture.
Expand your business without worrying about the budget. Getting a corporate loan today is easier than you can ever imagine!