Types of Corporate Business Loans Offered by Indian Banks

Types of Corporate Business Loans in India

The loans you can choose, the functions you can use them for – all in one page.

Business Loans are designed to help businesses of all sizes get financial support from the banking system. These loans ensure that enterprises can carry on their work smoothly. Business loans are divided into two categories:

• Corporate Business Loans: These loans are designed for established businesses that are looking for growth and expansion. The eligibility criteria for corporate business loans are stringent as compared to MSME loans. Corporate business loans are simply referred to as corporate loans or business loans (oftem leading to confusion)
• MSME Loans: These loans are reserved for businesses in the Micro, Small and Medium Enterprise (MSME) segment in India. These are usually start-ups or businesses that are not yet established and are looking to build a reputation in the market. The terms governing these loans are quite different from those on corporate loans since MSME units are not established, operate differently and have different needs than established businesses. (The government has also come up with specific definitions for each of these MSME units in terms of turnover or capacity, that banks most times find easy to use as a reference point.)

In this article, we are going to talk about corporate business loans.

Different Types of Corporate Business Loans Offered by Indian Banks

Corporate business loans are divided into different categories based on the objective behind availing the loan, the industry in which the business operates, etc. The different types of corporate business loans offered by Indian banks include:

Working Capital Loans

This loan scheme can be availed by businesses to finance their everyday operations such as investment in current assets, salary payments, power charges, purchase of raw materials, etc. These loans are perfectly suited during periods of reduced business activity or while waiting for payment from clients. These are short-term loans that may be renewed on an annual basis subject to review based on terms set by the lender at the time of loan application.

Term Loans

These loans are perfectly suited for capital expenditure needs of a business including but not limited to acquiring land and building, purchasing machinery, purchasing vehicles, building office units, upgrading equipment, etc. The bank may disburse the loan in stages or lump sum based on the needs of the borrower. These are usually long-term loans and can be availed by businesses in all major industries for business expansion and related activities.

Loans Against Property/Future Lease Rentals

If a business wants to raise funds against property then they have two options: avail a long against residential, commercial, or industrial property; or avail a loan against a leased/rented property. Indian banks usually offer a loan amount anywhere from 60% to 85% of the property value based on assessment. Most businesses avail these loans to get funds for their capital expenditure needs.

Commercial Vehicle Loan/Equipment Loan

Businesses in transportation, manufacturing and other sectors need vehicles or equipment to carry out business activities. Indian banks have a range of loan schemes specially designed for them including commercial vehicle loans, construction equipment loans, etc. These loans can be availed for the purchase of new or pre-owned vehicles/equipment. If the borrower purchases the vehicle/equipment, some banks still allow them to avail this loan and get reimbursement of the purchase within 3 - 6 months.

Industry-specific Business Loans

Industry-specific loans cater to the different needs of businesses in different sectors. Some of these loan schemes include trade finance, infrastructure finance, pharma finance, transport finance and project finance. These loans may be further divided into subcategories based on the business activities involved. For instance, a bank may offer a trade finance scheme and include different terms for loans required for pre-shipment and post-shipment activities. If the business activities involve dealing in multiple currencies such as Import-Export businesses, the bank may offer the loan in foreign currency as well.

Project-specific Business Loans

If a business needs funds for an ongoing project, a project finance scheme is going to be the perfect option for them. The business must get in touch with the chosen bank to know if the project is eligible for a loan and the applicable terms and conditions. These loans are usually popular in the infrastructure sector where a business may be handling multiple projects and need financial assistance for more than one at the same time. They can apply for loans for each project and ensure that they are able to execute and complete each project successfully.

Now that you know about the different types of corporate business loans offered by banks in India, you might want to know which is the right loan option for your business. Please check our Corporate Business Loans page for details.

Disclaimer: This article is for informational purposes only. All details provided here are correct as on the publishing date of this post. The bank may decide to discontinue a loan scheme and introduce another loan scheme based on the current needs of their customers. Please check with the bank and other official sources before taking any investment or related decisions.

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