There are available several types of business loans according to your financial needs. There are many choices to choose a business loan to fit your requirements. An Entrepreneur should know about the types of business loan and should apply according to needs. The various types of business loan are as following.
Term Loan
The term loan is for complete an entrepreneurs requirements such as a building or land or equipment – Capital Assets
The term loan is a type of business loan which is provided for long-term assets such as land or buildings, machinery. It has a fixed or floating rate of interest and fixed repayment tenure. The average repayment tenure in India is in between 2 to 10 years.
Term-loan financed for - Land & building, building construction, building renovation, purchase of machinery, equipment, vehicles.
Tenure-It can be sanctioned for 2 to 10 years of tenure.
Loan against Property
Loan against Property - A loan against a property by allowing business, private and empty land as a security to the banks and NBFCs. A loan against property can be utilized by the business for many reasons including starting a new business & its promotions, explore existing business, staff expenses like salary & other expenses, purchase of land, fulfill the requirement of capital, etc.
There are no limits on the utilization of assets – sanctioned as a loan against property. So, the assets can be utilized for any reason.
Residency: 2 to 10 years and it depends on borrowers profile.
Use of Assets for the loan against property -: A borrower can use it to a business or private or empty land.
Loan against Financial Securities or Shares
Loan against shares and mutual funds This loan can be availed against some financial securities like insurance policies & savings bonds, fixed maturity plans, exchange-traded funds, mutual funds units & Demat shares. In all cases a borrower cannot be pledged mutual funds and shares, a borrower can be pledged for those mutual funds and financial securities which are approved in banks and NBFCs rules. The loan against financial securities and shares can be used for any purpose.
Tenure - A borrower can renew this loan every 12 months.
These following assets can be used to get a loan against financial securities and shares –
- Mutual fund units
- Exchange traded funds
- Fixed maturity plans
- Saving bonds & insurance policies
- Demat shares
Cash Credit Facility
Cash Credit Limit for Inventory or Receivables
This type of a loan can be borrowed in the form of OD (overdrafts) on the source of process/raw/ trade materials. Cash credit facility loan is usually secured pledged with the current assets such as a business or company's receivables and inventory. The cash credit facility loan is quite useful for working capital finance-Inventory & receivables.
Assets that can be used for cash credit facility loan – Inventory & receivables.
Tenure - A borrower can renew this loan every 12 months
Letter of Credit (LC) Facility
Letter of Credit
The credit facility of LC (a letter of credit) can be received in such conditions whenever a buyer is unable to pay on the goods and purchases then the bank will pay the remaining amount to the seller. There are risk-free transactions of the trade from a letter of credit facility, and this facility is profitable where the seller and buyer may not know about each other and running a business from other countries. Letter of credit is used in international and domestic trade transactions to ensure that payment will be received where the buyer and seller may not know each other and are operating in different countries.
Letter of credit loan can be used for these assets - Inventory and capital assets.
Tenure - A borrower can renew this every 12 months