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About Corporate Loans

Financial loans in India can be broadly classified into two types:

  • Retail Loans
  • Business Loans

Retails loans are offered to individuals for various purposes. Personal loans, Home loans, Vehicle loans, Educational loans, etc., are offered under retail loans.

Business loans or Corporate loans are mainly sought out by business owners, corporates and companies, to fulfil their daily business needs or to add to their working capital, to procure raw materials, to acquire assets, etc. It is basically a loan availed to run their business smoothly.

Corporate loans are offered in various kinds:

  • Term loans
  • Line of Credit
  • Working Capital loans
  • Venture loans
  • Real estate loans
  • Equipment loans
  • Loan against future lease rentals
  • Export financing
  • Bill financing
  • Short-term loans

The above is only a few of the numerous financing options available for businesses. The loans are pre-dominantly secured loans and are offered based on the creditworthiness of the applicant and at the discretion of the bank. These loans involve higher risk and hence come with higher interest rates and strict repayment terms.

Corporate Loans
Corporate Loans

Usage of a Corporate Loan

As mentioned earlier, corporate loans are offered to business entities & corporates. Some of the reasons to avail a corporate loan are

To start a new venture :

When you have an enterprising idea and would like to put it to action, you require the capital to start it. One can approach a bank or an NBFC to apply for a Venture loan to start a new business enterprise.

Daily business needs :

A firm or a business entity may need funds to meet the daily expensed of their business. These funds might be required for smaller expenses like rent, utilities, salaries, petty cash, etc. Then you can apply for a loan.

Purchase of assets :

When the business requires to purchase and install assets like building, machinery and other equipment, they can apply for a corporate loan.

Procurement of raw materials :

The business needs constant flow of capital to invest in new opportunities. They will require to buy raw materials to start a fresh batch of production. Corporate loans help you to avail quick cash while you are waiting for future payments or pending invoices.

Various Forms of Corporate Loans

These corporate loans are offered in various forms. Cash is not the only form in which loans are offered. Let us have a look at the various forms of credit offered under Corporate loans

  • Working Capital loans :
  • This is the most basic form of Corporate loan. This loan is availed to meet the daily business needs. This loan can be availed either as a Cash Credit, Line of Credit or Overdraft facility. This could be a Demand loan, or a Term loan based on the needs of the borrower.

  • Line of Credit :
  • This is a facility extended to creditworthy customers of the bank. A Line of Credit establishes the maximum loan amount that can be used by the borrower. The borrower can then draw on the line of credit at any time, making sure that they do not exceed the maximum limit set. The borrower is charged interest only for the amount that he/she used.

  • Real Estate loans :

    This loan provides for acquiring or creation of real estate such as office buildings, industrial or factory space, warehouses & cold storage units, retail spaces, hotels, multiplexes, gymnasiums, amusement parks, etc.

  • Asset backed loans :
  • This loan can be availed for creation of assets for business needs. The assets can be for capacity expansion, modernization, adoption of latest technological processes, short term working capital, etc.

  • Export financing :
  • This is a pre-shipping financing extended to export companies. The loan amount can be used for purchase of raw materials, packing, transportation and warehousing of goods meant for export. This loan can be availed by submitting proof of the export order or a letter of credit by the importer.

  • Equipment financing :
  • This loan can be availed to procure necessary equipment to run the business. It can used for procuring medical equipment like scanning machines, x-ray machines etc; sewing machines for a textile factory, meat processing machines, grinding machines, and other similar equipment.

  • Loan against future lease rentals :
  • This loan is mainly sought out by property owners, who have a substantial rental/lease income. They can avail loan against their forecasted rental/lease receivables. However, the lessor should be reputed corporates or government entities.

  • Finance against future receivables :
  • Loan can be availed against assured future receivables from reputed corporates or non-corporate borrowers.

  • Short-term loans :
  • Business entities can avail various short-term loans to finance their immediate business needs, while waiting for a much larger and permanent source of funding. These loans are usually for smaller amounts and smaller periods of time. These loans have higher interest rates compared to other Corporate loans due to the high risk involved.

The list of corporate loans offered by banks and NBFCs is quite long. Each institution has a customized set of loan products to suit individual needs. Below, we have enlisted a few well-known corporate loan products by a few leading banks.

State Bank of India

The leading lender of the country has numerous products for the business sector too. They have one of the most exhaustive list of corporate loan products to suit every need

Their Corporate Loan segment is divided into two –

  • Industrial Sector
  • Trade & Services Sector

Industrial sector focuses mainly on manufacturing and huge industrial enterprises and their loan needs. The products under this segment include

  • Working Capital financing
  • Project financing
  • Deferred Payment Guarantees
  • Corporate Term loan
  • Structures financing
  • Equipment leasing
  • Dealer financing
  • Channel financing
  • Loan Syndication

The Trade & Services sector includes

  • Transport financing
  • Bill financing
  • Cash credit for traders
  • Term loan for asset acquisition
  • Letters of credit
  • Bank guarantees

Punjab National Bank (PNB)

PNB is very popular among business owners for corporate loans. They offer quick and hassle-free loan processing. Their products are highly customized to suit individual needs. Some of their offering are

  • Financing for Rooftop PV Solar Power Projects
  • Loan against future lease rentals
  • Working capital financing
  • Project finance & Infrastructure financing
  • Export financing, etc;

HDFC Bank

HDFC Bank has quick and simple corporate loan processing. They offer almost all forms of Corporate loans

  • Working capital finance
  • Short term finance
  • Bill discounting
  • Structured financing
  • Export credit

ICICI Bank

ICICI Bank offers a very comprehensive set of banking solutions to its corporate. Some of their offerings are:

  • Working capital financing
  • Term loans
  • GST Business loans, etc.

Conclusion

Corporate loan is a huge segment of financing. Most banks and NBFCs offer corporate financing in India. It is totally need based and depends on various factors like the size of the business, fund requirement, creditworthiness of the customer, etc. The intended borrower should approach their nearest bank or NBFC to learn more on the products offered by them and select the right product to suit his requirements.

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