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A Business Instalment Loan, is a form of business loan, sought out primarily by MSMEs to overcome some short-term financial exigencies. These loans have a pre-determined instalment and repayment tenure. The term can be as little as a few months and extend for up to 5 years. The loans are offered based on the credit standing of the customer and hence do not require any collateral or security.
This loan is beneficial for small and micro enterprises and professionals looking to set up their own practice, who are otherwise unable to provide any large asset as collateral but have considerable turnover over the years. It is similar to home loans, personal loans or vehicle loans, where the borrower pays a fixed EMI for a fixed number of years to repay the loan.
About Business Instalment Loan
The entities must be registered and recognized as MSME units.
This loan is available for
Business age :
The age of the business should be at least 3 years. While ICICI Bank requires a minimum business age of 5 years.
Repayment Tenure :
These are basically short-term loans. Tenure of the loan is usually 1 year to a maximum of 5 years. However, based on bank’s discretion and customer loyalty, this may be extended.
Pre-payment of the loan is allowed after one year of clean repayment, with nominal pre-payment charges.
Rate of Interest :
The interest rate on these loans is generally high due to the high-risk factor involved. The current rate of interest for Business Instalment loans prevails at 15% - 25%
Quantum of loan :
The loan amount depends on various factors. The lender investigates the credit rating, turnover records, industry performance, quality of management, company’s competence, viability of the business model and other similar parameters. One can avail loans starting from Rs. 10 lakhs up to Rs.125 lakhs
As stated earlier, this loan is primarily offered to business entities. Commercial banks are an apt choice to apply for this loan. Some of the leading lenders of this loan are given below. Please understand all the features offered by the lender and choose the right one to meet your requirements. Following are some of the popular banks that provide business instalment loan.
Standard Chartered Bank – Business Loans/Guaranteed Instalment Loans
Deutsche Bank – Business Instalment loan
ICICI Bank – Business Instalment loan
A wide range of products to suit varied needs
Loan on Audited Financials :
Can be availed by proprietorship firms, partnership firms, private limited companies and unlisted public limited companies. Loan amounts of up to Rs. 40 lakhs can be availed.
Loans for Doctors :
Loan amounts of up to Rs. 40 lakhs to set up their own practice
Loans for Professionals with no audited financials :
CA, CS, Architects or CWA/CMA can avail this loan. They can get up to Rs. 15 lakhs
Loans for Non-professionals based on IT returns :
Loan amounts of up to Rs. 10 lakhs by producing certified financials
Loans based on Assessed Income :
Loans can be availed based on various existing relationship with the bank, viz; a sanctioned home loan or a vehicle loan, current account history, established rental income from residential or commercial property. Loan amounts of up to Rs. 10 lakhs can be availed under this scheme
IDFC Bank – Business Instalment loan
A business instalment loan is a very convenient form of financing for small and medium enterprises. It allows them to avail short-term liquidity without providing any security or collateral. These loans can be highly customized based on the business model and the repayment capability of the borrower. They offer lower interest rates compared to other revolving credit facilities like credit cards, placing substantial working capital in the business owner’s hands. Loan processing is based on current business financials and hence do not require huge paperwork.
However, these loans are offered at fixed interest rates for the tenure of the loan, which denies the customers the benefits of fluctuating market conditions. The loan locks the borrower into a long-term repayment obligation. Unfavourable business conditions may render the borrower incapable of repayment and result in default and forfeiture of any collateral submitted.
Though, a business instalment loan is a prudent way of securing liquidity, the borrower should understand the nitty-gritties of the loan before tying themselves with it.
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