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About Business Instalment Loan

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.

Business Instalment Loan
Business Instalment Loan

Advantages of Business Instalment Loan

  • Quick & hassle-free loan processing
  • Fixed EMI and fixed term make it convenient to track the financials
  • No collateral or security required
  • Customers with good credit history can obtain higher loan amounts
  • MSMEs can avail this loan under credit guarantee by CGTMSE
  • The loan can be used for working capital requirements, asset building & acquisition, expansion and modernization of existing units

Eligible entities to apply for this loan

The entities must be registered and recognized as MSME units.

This loan is available for

  • Proprietorship firms/Partnership firms
  • Private Limited Companies
  • Professionals – Doctors, Architects, Chartered Accountants
  • Business Consultants
  • Closely held Public Limited Companies

Features of Business Instalment Loan

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

Documentation requirements

  • Bank statements of past 6 months
  • VAT/GST and other tax statements of past 1 year
  • 2 year audited financial statements – Profit & Loss statement, balance sheet and IT returns
  • KYC Documents
  • Any other documents as requested by the lender

Where should I apply for a Business Instalment loan?

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

  • High loan amounts of up to Rs. 75 lakhs
  • Attractive interest rates starting at 13.5% p.a for Guaranteed Instalment Loans and 17.25% p.a for Business Instalment loans
  • Special offers and benefits for branch customers and direct sourced customers
  • No security or collateral required
  • Flexible repayment tenures of up to 60 months
  • Attractive term loans bundled with current accounts
  • Zero balance current accounts with a dedicated relationship manager can be opted
  • Guaranteed Instalment loans backed by CGTMSE catering to priority sector
  • Option to apply for incremental funding post 10 months of clean repayment

Deutsche Bank – Business Instalment loan

  • Quick & hassle-free loans designed for small & micro enterprises belonging to the manufacturing, processing, preservation of goods and the service industry sectors
  • Loan amounts of Rs. 10 lakhs up to Rs. 50 lakhs
  • Personal guarantee by key partner as guarantor on the loan
  • Loan amount based on robustness of the business model, management quality, industry performance, turnover growth and other similar parameters
  • Pre-payment post 9 months of clean payment and NIL pre-payment charges

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

  • Unsecured loans offered to self-employed individuals and business entities
  • Low processing fee
  • Minimal paper work
  • Doorstep pick up of documents
  • Comprehensive insurance plans for the loan

Points to remember while taking a 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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