As a developer, your primary target is the completion of the project at hand with strict adherence to timelines and ...
Term Loan is a loan borrowed for fixed amount over the fixed period of repayment and floating rate of interest. The borrower is offered a predefined schedule of repayment by the lending institution comprising of principal amount and interest thereon. Term loan is secured by a collateral security. Term loan facilitates the borrower to raise a stipulated amount one time and plan the business expenditure or investment or purchases on his or her own. Term loan is normally preferred by small and medium scale businesses to meet the needs of working capital or to buy assets or infrastructure which is required to run the business on day to day basis. It may include purchase of machinery or buying an office or workshop premises the maturity period or term is between 1 – 10 years.
The Term Loan Can Be Availed To :
Purchase Of Fixed Assets :
The term loan can be used to purchase fixed assets like premises, plant & machinery etc. The usage or performance of assets increases the business performance and hence the profit and makes the repayment of the loan easier. Even the term loan is settled the assets procured continue the productivity as asset life span is certainly longer than the term loan span. If a premises is purchased then the value of premises is always appreciated and in that case the business leverage higher value of premises which further can be used to raise funds for business expansion or diversification.
Switching Of Higher Interest Loans :
Many a time’s business owners opt to raise business loans at higher rate of interest. Such loans are processes and sanctioned faster but result in heavy burden interest. This interest payment becomes a fixed monthly expenses and starts leaking the profit. To arrest the growing rate of interest and penalties the higher interest loan can be switched to lower rate of interest loans or term loans. This way a borrower reduces the growing burden of interest on business loan and can save a considerable amount of money. It also benefits in maintaining the credit rating as the borrower closes one loan liability and opens another in form of term loan with lower rate of interest and easier repayment conditions.
Mortgage Term Loan :
A term loan can be availed by mortgaging a kind of security like home, office premises etc. This type of loan is borrowed for longer period of time that is 10, 15 or 20 years. The repayment of the principal amount and interest may be fixed in nature or it may vary over the course of repayment. The borrower may avail the revised rate of interest later and may be benefited by saving in interest.
Working capital is also known as Cash credit. Bank provides working capital facility to the industry to finance day-to-day requirement. The working capital funds are generally required for purchase of raw materials, stores, fuel, for payment of labour, power charges, for storing finished goods till they are sold out & for financing the sales by way of sundry debtors / receivables. Cash credit facility is granted to the customers to bridge working capital gap.
Cash credit (CC) is granted against hypothecation of stock such as raw materials, work-in-process, finished goods and stock-in-trade, including stores and spares.
CC is granted by way of a running account, drawings to be regulated within the drawing limit permissible which is arrived at on the basis of composition of current assets and current liability based on the declaration in the stock statement in the prescribed format submitted by the borrower
Foreign credit/Foreign Loan
Corporate loans are available to the existing businesses / industrial houses in Indian rupees or in foreign currency. Corporate loans are obtained to generate funds or working capital which is business objective specific. Corporate loans are sanctioned to those applicants who establish their business existence for at least 5 years out of which last 2 years with profit coupled with strong credit rating and proven track of successful business transactions. The repayment status with other lenders or financiers, strong working capital management etc. Are the other factors considered by the lending institutions while sanctioning the loans?
With quite competitive rate of interest corporate loan is one of the well accepted ways to raise the business finance for a period of 5- 5.5 years.
Loan sanctioned to construct or develop a new real estate project including both residential as well as commercial is known as loan for new construction. An individual or a firm or company engaged in the business of real estate development or construction (builder) can avail this loan.
Banks or other lending institutions prefer a builder having some reputation and background of quality construction to grant this loan. Lenders expect the builder to be in business for at least 2-4 years. The previous financial statements and the cash flow statements are the key documents based on which the lenders decide the limit to what the loan is to be sanctioned. The maximum limit of loan to be sanctioned may vary from lender to lender depending upon internal policies. Besides the financial statements the lending institutions also insist upon the original sale deed of the plot or land and subsequent documents, the profitability of the project, the monthly or quarterly cash flow (projected) detailed plan, layouts and estimates from chartered engineers or architects, approvals from the authorities like municipal corporation etc.
Builder has an option of repayment either in 3-5installments or lump sum after selling the developed premises. In addition builder may choose either floating or fixed rate of interest on the loan sanctioned. The rate of interest is determined by the prime lending rate practiced by the banks or lending institutions.
Real estate is India’s rapidly developing business segment and multiple financial institutions including banking and non banking are offering loans for new construction.
Project loan is given by the lending institution or banks to the borrower for the purpose of business expansion, reconstruction etc. Project loan is also available to acquire the fixed assets like land & building, plant & machinery etc. Project loans are available to the existing business or industrial houses for growth purpose and equally available to the new business entrants in form of seed or start up capital. Projects loans are generally mid or long term period loans but lending institutions may consider the short term loan applications depending upon the feasibility of the project. The short term project loan can be availed for one year whereas the mid and long term project loans can be obtained for up to 10 years.
The rate of interest is quite competitive as the loan term is longer and may be affected by the periodic changes made by the lending institutes. Construction & infrastructure, engineering, auto mobile, power, gas & petrochemical industries are some of the business domains generally leverage on the project loans.
The aspirants should have the detailed project report ready as it is the very basis of getting project loan sanctioned. The lending institutions seek good credit, strong solvency ratio, strong management systems, technology penetration etc. As granting criteria for project loans.
ECB Funding & Overdraft
We can help you with external commercial borrowing funding. We can organize debt fund in foreign currencies / Indian rupees. We can arrange debt fund at astonishingly competitive rates. We adhere to the guidelines of the ECB. You can depend on us for arrangement of funds and clearance through RBI. We care about financial expansion. ECB includes bank loans, buyer’s credit, supplier’s credit, fixed rate bonds, floating rate bonds, etc.
Overdraft facility allows the customer to withdraw the money even if the amount to be withdrawn is in excess of the credit balance available in the overdraft account. Overdraft facility enables the customer to honour the payments to be made to the third party, even though the account may not have sufficient balance. The maximum overdraft limit is sanctioned by the bank and is agreed upon by the customer. The excess amount withdrawn over the overdraft limit is charged interest upon and must be settled by the customer on demand from the bank in India.
Based on the security pledged to the bank, a certain limit is fixed to the extent of which the customer is allowed drawing.
Overdraft facility is given by all leading banks. Banker open overdraft account against security offered by customer and give this facility for business in banking language it is known as OD account. Overdraft is a type of secured loan. Generally rate of interest in overdraft case are low then personal loan and unsecured business loan.
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