Business Loan

The charges for availing loan may include Processing Fee, Documentation Charges, Stamping, Affidavit and Notary fee etc.

Certain charges like Documentation Fee, affidavit and Notary fees are absolute figures, whereas Processing fee is a percentage of the loan amount.

Documentation, stamping, affidavit and notary fees put together ranges from Rs. 2000 to Rs. 5,000 and Processing fee ranges from 2 to 2.50% of the loan amount.

All these charges are borne by the borrower. The borrower either pays upfront or the same is deducted from the loan amount.

Business loans are collateral-free loans and come without end-use monitoring. The usage of the fund too not mandated, except that such fund cannot be utilized for investing in the stock market or speculation transactions. Businesses borrow Business loan for various reasons:

• Business Expansion through the acquisition of capital assets
• Margin money for large loans
• Acquisition of land for future business use
• Technology upgrade
• Managing seasonal surge in business
• Deposit for a new line of business

Business Loan has come a long way since its Introduction. Lenders have evolved in understanding the risk. Based on various other financial & non-financial aspects from where lender derives comfort in taking the exposure, they have designed schemes. Lenders calculate eligibility under several schemes; a borrower should apply under the most suitable scheme to be most benefited. aagey.com, with its rich experience and extensive studies has developed proprietary algorithm which analyses 1,000+ schemes offered by 75+ lenders to bring the best fitment possible. Few of the schemes are:

• Income to Obligation method
• Based on the transaction and average balances maintained in the business account
• The perceived margin of the industry to which the borrower belongs
• Based on monthly GST returns files
• Rental income received

Track record of repayment of existing or earlier loans from other Lenders.

Foreclosure or Pre-payment is the process when one repays the loan before the loan tenure ends. Foreclosure of loan comes with penal charges depending upon the number of EMIs paid. Shorter the EMI servicing period, higher the penal charges. Foreclosure charges range between 2% to 5% of the outstanding amount.

Minimum EMI servicing period to be eligible for foreclosure is 6M to 12M depending upon the policies of each lender.

Most of the lenders look for a business track record for lending. A newly started business or startup fails to exhibit historical business performance, thereby fall short of getting funding under widely known loan products. Also, Business Loan as a product is offered to businesses established for more than 3 years. Hence, a business which is less than 3 years has fewer lenders as options and limited schemes to choose from. Lenders are started offering innovative schemes through holistic risk assessment to accommodate businesses having quality cashflow management with better future prospective.

If borrower has sufficient funds, but not enough to pre close entire loan amount, then part payment option can be considered, where a part of the loan is repaid. Such payment brings down the EMIs and the total interest paid and to be paid. This is easy, but an effective way to save on the interest outgo during the tenure of the loan.

However, Part-payment of business loan is not allowed by any of the lenders. One has to either make full payment or continue paying full term periodic EMI.