Expanding and taking business to the heights of success is a dream of every entrepreneur. At times, the entrepreneurs would require finance on an urgent basis to fuel this growth prospective. India is the developing one in the growth parameter and so is the Indian banking system. With the diversification of banking products specialised ‘business credit’, a unique lending facility for small and medium Businesses with minimal security has come into force. The available credit under these finance schemes can be extended up to Rs. 35 lakhs. No security pledging required for loans up to Rs. 15 lakhs and for higher loans amount the borrower has to provide only 25% margin in the form of an fixed deposit of the concerned bank.
These loans sometimes work like an overdraft and are available like a limit on the current account of the borrower. Interest is charged only on the actual amount utilised by the borrower. This credit comes with easy repayment options. The minimum amount due on the borrower every month is 5% of the outstanding balance. This amount can be withdrawn in the next month after deduction of interest. The documentation varies from loan plan to loan plan. In some loan plans you need to submit documents every month while some loan plans need one-time submission of the documents. The borrower can has the loan amount in his current account within days of the submission of complete documents and security margin, if applicable.
Some Indian banks offer loan for business up to a limit of Rs. 15 Lakhs in a completely unsecured manner. They require only 25% margin for above Rs. 15 Lakhs and up to Rs. 35 Lakhs. In such case the business loan facility is normally secured by the current assets of the borrower. Also a regular stock and book-debt statement needs to be given to banks on monthly basis for availing the desired cash in an uninterrupted manner. As long as the minimum amount due (5% of outstanding balance) is credited into the account on a monthly basis, the business loan offered by the Indian banks works exactly like an overdraft facility.
The loan for business can be utilised within days of approval of the application and submission of required documents by the borrower. However the interest calculation is somehow little bit confusing. In some loan plans the interest is calculated on daily balances while some charge interest on monthly basis on the actual amount utilised. The minimum amount due in case of many business loan plans is 5% of the outstanding or Rs. 1000, whichever is higher, is required to be credited to the account on a monthly basis. Repayment of the loan amount can be done with a cheque or cash deposit to the credit of the overdraft account.
With the loans for business the borrower receives an ATM card through which he can have round the clock, instant access to money by way of cash withdrawals across the country. The withdrawal amount is subject to the daily withdrawal limit per day on the ATM card. Terms and conditions for the issue / usage of the ATM card is done in accordance with the current account rules. Business loans are also open to firms and corporations to meet their operating expenses; to finance for capital expenditure / acquisition of fixed assets towards starting / expanding a business or industrial unit; and to swap existing high cost business debt from other bank / financial institution etc. Apart from providing the required bank can also issue letters of credit or can give a guarantee on behalf of the borrower to the suppliers, government departments for the procurement of goods and services on credit.