As the name suggests, commercial loans refer to the credit facility extended by various financial institutions to businesses in India. Such secured or unsecured financing options can be utilised for commercial purposes. Moreover, this type of credit is extended through a debt-based funding agreement between a lender and the business entity. Almost all financial institutions offer such loans to various companies and firms to help them meet their necessary business operations.
However, commercial loan interest rates differ based on the nature of credit.
Why do commercial loans have higher interest rates?
Usually, the interest rates of unsecured commercial loans are higher due to risks associated with such collateral-free loans. Since there is no security for lenders to retrieve the sanctioned amount in case of defaults, financial institutions are left with no choice but to levy a higher interest rate on such unsecured loans.
Features of commercial loans
Commercial property loan are a unique financial product designed for various organisations to meet necessary business expenses easily. Due to stringent eligibility parameters, many small businesses cannot acquire regular credit options. In such cases, they must depend on alternative options like commercial loans, loans against property, term loans, etc.
Nonetheless, here are some of the highlighting features of commercial loans.
Nonetheless, here are some of the highlighting features of commercial loans:
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High-value loan quantum
Such financing option is extended to business entities and not to individual consumers. Since commercial loans come in both secured and unsecured variants, borrowers have to provide a valuable asset as collateral when choosing the former category.
In such scenarios, the commercial loan interest rates will be on the lower side as the risk factors are also lower for the lender. On the other hand, interest rates will be higher when availing of the unsecured variant.
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Extended repayment tenor
Usually, commercial loans are extended for a shorter period. In most cases, commercial financing option works like traditional business loans. It means borrowers are required to pay off the debt with interest within a stipulated tenor. However, the applicable loan tenor will vary across lenders. In the case of commercial equipment loans or construction loans, borrowers can opt for longer tenor as well. In this regard, borrowers can use a commercial loan EMI calculator to determine the ideal tenor for them and plan their finances accordingly.
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Flexibility of fund-usage
The funds obtained from such financing options can be utilised to fund varied business expenses such as installing advanced machinery, purchasing high-end equipment, renovating offices etc. Moreover, such loans are extended to non-professionals and self-employed individuals as well. Such loan applicants need to apply on behalf of their organisation.
Eligibility criteria and documentation
Like every other credit facility, lenders specify certain pre-determined eligibility parameters along with necessary documentation. Following are some of the essential eligibility parameters that business entities are required to meet for obtaining the credit:
- Applicant’s age should be within 24-70 years. However, the age should be 70 during loan maturity
- Must be an Indian resident
- CIBIL score must be 685 or more
- Must be a business vintage for at least 3 years
Apart from these, borrowers need to provide the following documents to ensure hassle-free loan approval.
- KYC documents
- Business ownership proof
- Other financial documents
Thus, by meeting the above-mentioned criteria and producing essential documents, borrowers can get an affordable commercial loan interest rate against the borrowing.
Steps to apply for commercial loans
Here are some of the simple steps to applying for commercial loans:
- Step: Visit the preferred lender’s website and click on ‘apply online’ to get the application form
- Step: Input your basic information and verify with the OTP sent to the registered contact number
- Step: Feed your personal and business details
- Step: Submit financial statements for the last 6 months and submit the application form
After successfully submitting the loan application form, one of the loan representatives will contact you for further loan proceedings.
Apart from this, prospective loan borrowers have an alternate financing option such as a commercial property loan which they can avail by mortgaging a non-residential or commercial property. Borrowers can use the funds for meeting big-budget business expenses comfortably.
Such a loan against property ensures a substantial loan amount based on the market value of the mortgaged commercial property. Moreover, lenders also lay down certain eligibility for the borrowers at competitive interest rates before sanctioning a loan amount.
By knowing about the step-by-step guide to applying for a loan against property, business owners and also salaried individuals can fulfil their financial requirements and boost their desires.
However, borrowers need to understand the charges on loans against property to efficiently plan their budget for repayment and make an informed decision. Availing of such credit options from large-scale financiers will allow prospective business owners and individuals to enjoy the benefit of pre-approved offers on a range of secured and unsecured financial products.
Such exclusive offers eliminate the hassle of extensive documentation and accelerate the overall loaning procedure. Therefore, existing borrowers can check their pre-approved offers by mentioning their names and contact details.
To summarise, commercial loans are obtained to fund capital expenditures without losing their equity. However, before applying for a such financing option, prospective business owners must review the qualifying parameters and thoroughly compare commercial loan interest rates in India to ensure affordable borrowing.
