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About Loans for Schools

Lofty goals do not beget scholars. Indian parents of the millennium are desirous of educating their children in a state-of-the-art institution with great infrastructure. They seek new opportunities and avenues for the growth and development of their children – and they are willing to pay the price for this.

Setting up a school, however, is not an easy task – especially if it must provide all the varied channels for growth such as sports, technology, and academics. The infrastructure alone is a costly affair, let alone technology and foreign collaborations. This can make setting up a school an extremely costly affair.

Recognizing the need for better schools that provide better opportunities to children, Banks and NBFCs now offer loans for schools. An individual or organization desirous of setting up a school can avail of loan for the specific purpose of opening a school rather than a general business loan.

Below are some of the institutions that offer loan for schools in India.

Loans For Schools
Loans for Schools

Baroda Vidyasthali Loan

Offered by Bank of Baroda, this loan is for establishment of new schools as well as for repairs, renovation, upgradation, and enhancement of existing schools. The maximum amount available is 25 lakhs. The school or prospective owner must submit detailed project plans and cost to the bank. Only 75% of the total project cost will be approved as a loan subject to an overall limit of INR 25 lakhs.

Rate of interest on Bank of Baroda loans for schools ranges from 10.6% to 11.85%. The interest rate varies with the amount of loan and term among other things. The loan term may extend up to 7 years, which includes a moratorium of 2 years.

The loan requires collateral and hypothecation of property for which the loan is being taken. The following assets may be purchased with the loan amount –

  • Land and building
  • Computer equipment
  • Laboratory equipment
  • Furniture
  • Other movable assets

The assets purchased will be hypothecated to the bank for the loan term.

The bank also requires personal guarantee of the promoters, trustees, or founders of the institution as security against payment.

Loans for Schools and Colleges

ICICI Bank is another Indian Institution offering loans for schools and colleges. The loan may be utilized to set up new operations or expand, upgrade, or renovate existing ones. The following are some ways in which you can get an ICICI Bank’s loan for schools and colleges -

  • Loan against fee receivables
  • Overdraft to fund working capital
  • Bank guarantee for monetary commitments
  • Term loans
  • Working Capital Loans

The rate of interest, EMI, and repayment mode as also the term of the loan will vary depending on the type of loan you opt for and the amount you need.

Varthana Secured and Unsecured Loans

Another source of loans for schools is the Varthana secured and unsecured loans. These loans are offered by Varthana – an NBFC operating in the financial and educational sector. The organization offers both secured as well as unsecured – collateral free – loans.

The general eligibility criteria for secured loan is –

  • The school must have a minimum of 500 students enrolled at the time of loan application.
  • The school must have been in operation for at least 2 years
  • The school should have a good credit rating and loan repayment history
  • The school must have achieved at least 80% success rate in the highest grade of the school.

The criteria for unsecured loans includes –

  • A maximum tenure of 3 years
  • Loan amount of up to 75% of project cost or equipment value
  • A minimum enrolment of 300 students
  • Adequate quotations and estimates to be supplied as proof of project cost

ISFC Loans

ISFC (Indian School Finance Company) Private Limited is an NBFC that offers education loans to private institutions for -

  • Setting up schools and college infrastructure
  • Equipment, furniture, etc. for vocational institutions
  • Purchasing premises, equipment, or renovation of coaching centers
  • setting up or expanding play schools
  • SMES in the education industry
  • Purchasing new or used busses for plying children to and from school
  • Personal loans for teachers working in private or government schools
  • Education loans for children

Loans offered by IFSC are term loans and the loan amount varies depending on whether the loan is secured or unsecured. The upper limit for unsecured loans is 15 lakh while that for secured loans is 2 crores.

Most banks and NBFCs offer loans for education as well as for educational institutions. You may explore various options and compute EMI using the online EMI calculator tool before deciding upon the type of loan you need and the amount.

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