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All loans are not created equal, SME loan has become a great option for people to use.
An SME loan is meant to give a boost to your business. A business always requires financing, be it at an initial stage or during its growth. The additional finance helps the business to keep its momentum. The SME loan will help you to finance your business and keep it prospering.
Yes, it is possible to extend the credit loan for a business loan. However, it would be subject to the eligibility criteria at the time of the request and would be done at the sole discretion of your lender. You would need to submit a request letter for this.
Line of credit is a unique credit facility that is given to the loan applicants. The monthly instalment for Line of Credit would consist of the interest amount and not the principal component on a monthly basis. The principal amount of the loan has to be repaid at the end of the tenure of this facility.
The calculation of the interest is actually pretty simple. There is a formula that can be used for the calculation. The interest = (Amount * Rate of interest) / 360 * Number of days for which the fund has been used. This is how the banks calculate their interests.
In term loan, the customer avails the loan and repays them in equal instalments. There would normally be an option to prepay with surplus funds. However, they would not be withdrawal options. In Line of Credit, the customer avails the loan and uses it as a fixed credit line with renewal option every year.
Along with the interest rate applicable to the loans, there is also broken period interest. Also, there will be a processing fee and foreclosure charges. The government charges Goods & Services Tax as well. Penal interest needs to be paid in cases of delay in payment.
The loan amount generally varies on the situation. If you can promise a good business, you might be approved for a higher amount of loan. Generally, the loan amount starts from 1 lakh and can extend to as much as 50 lakhs. It will depend on the lender.
You can decide the tenure of the loan, depending on how much you would earn through your business. You can pay the loan back in a minimum of 12 months. However, if you want to extend the tenure, you can repay it in as much as 4 years.
No. You would not need to offer collateral in most of the cases. However, if your application does not satisfy your lender completely, you might need to put something as collateral. You should talk to your lender in detail on this topic.
Sole proprietorship firms, public limited companies, private limited companies, partnership firms or manufacturing, trading and service units are eligible to avail SME loans. Also, as a firm, you need to have made profits in the last 2 years.