Corporate Loan

What is a Corporate Loan?

Corporate loans are loans given to a business. A corporate loan is given to businesses if they meet certain requirements. Companies can get corporate loans to finance their operations. These include capital investment, company expansion, working capital, administrative, and operational costs. Corporate Loans can be used to procure raw materials for a business, purchase assets for an existing one and even daily business essentials. 

How does a Corporate Loan work?

To know what is corporate loan it is important to comprehend how it works. A corporate loan offers funding through a credit line or a substantial money. The loan is given against the security of repayment, interest, and additional costs. The duration of repayments is usually discussed between the business and the lender, depending on the loan amount. 

Corporate Loans function either as secured or as unsecured. Secured loans have the benefit of a collateral. The assigned collateral is reposed in case of failure to repay. Collateral is not needed if the loan is not secured. The loan takes signs of a personal guarantee admitting payment liability. 

List of Number of Banks & Financial Institutions that offer Corporate Loans

The list below offers information regarding the top 5 banks and financial institutions providing corporate loans and ancillary details. 

Types of Corporate Loan

The seven major types of corporate loans are:
1. Term loans
2. Business Line of Credit
3. Equipment Loans
4. Merchant Cash Advice
5. Export financing
6. Real estate loans
7. Short-term loans

Overview of all types of Corporate Loan

Here’s a brief outline of each type of corporate loan listed in the previous section:

Term Loans
The most applied form of corporate loan is a term loan. These are given on a short-term or long-term basis. 

Business Line of credit 
The bank offers this service to its creditworthy customers. A line of credit determines the borrower's maximum allowable loan amount. After that, as long as they don't exceed the maximum permitted amount, the borrower is free to use the line of credit whenever they choose. The borrower only pays interest on the amount that is used.

Equipment Loans 
A company can benefit from equipment financing by purchasing essential equipment, including big manufacturing gear and little gadgets. The cost of the equipment being financed determines the loan amounts.

Merchant Cash Advice
A merchant cash advance (MCA) is a simple method to get short-term funding. In exchange for a one-time cash payment, business owners provide the lender a percentage of their future sales proceeds.

Export Financing
This pre-shipping credit is given to export businesses. The loan amount may be applied to purchasing raw materials, packaging, shipping, and storing items intended for export. 

Real Estate Loans
A commercial real estate loan might benefit companies requiring capital to purchase commercial real estate. Similar to loans for equipment, the asset being purchased acts as collateral to guarantee the loan.

Short-term Loans
Businesses can opt for loans spanning shorter durations and lower amounts while they wait for bugger financing.

Features of Corporate Loan

The key features of corporate loans are:
1. Reasonably priced interest rates- Many reputable financial institutions have interest rates lower than the industry standard.
2.  Fast Approvals - Delays can adversely affect business earnings, particularly those resulting from inadequate capital. Almost all lenders provide rapid approvals for their corporate loans.
3. Collateral-free – Most corporate loans do not require collateral.
4. Online Transaction – Corporate loans can be availed through a simple online application.
5. Prolonged Loan Period – A flexible repayment plan with a business loan based on the company’s cash flow can be selected. 
6. Streamlined Procedure for Documentation – Most banks and lenders require essential documentation for application.
7. Greater Amounts Disbursed for Loans - The company need enough funding to cover its expenses and working capital requirements. Through corporate loans, amounts as high as 20 crores can be availed.

Eligibility Criteria for Corporate Loan

The essential criteria for corporate loans are:
1. Age of applicant: 21 to 65 is the typical lender's eligibility range. 
2. ITR filing: The applicant is required to file their prior year's ITR. Based on the filed ITR, an applicant's credit repayment capacity and monthly income are assessed.
3. Banking stability: Lenders often review bank statements for at least six months before approving a loan. 
4. Stability of the company: To determine the development and stability of the company, lenders also review the company's past. 
5. Annual income: Different lenders have different requirements for loan eligibility based on an applicant's annual income. 

Corporate Loan Interest Rate

There is no fixed interest rate for corporate loans. It depends on the lender, the amount, and the loan repayment tenure. 

Documents Required to Apply for Corporate Loan

ocuments required are: 
    1. PAN card.
    2. KYC Documents (Identification and Address Proof) - Aadhaar Card, Driving License, Voter Card, Passport.
    3. 6-month bank statement
    4. ITR, Trade License, Establishment Certificate, or Sales Tax Certificate.
    5. A declaration of a partnership deed or  sole proprietorship 
    6. A certified copy of the MOA (Memorandum of Association)
    7. An AOA (Articles of Association).
    8. Board resolution

Benefits of a Corporate Loan

The key benefits of corporate loans are:Fast disbursement: Banks will promptly pay out a business loan, removing any concern you may have about activities ceasing or expansion plans being postponed due to a lack of funding
Documents: Corporate loans do not require too many documents.
Competitive interest rates: Business loan interest rates are relatively low. This eliminates the stress of high loan repayments.  
Tenure: Loan repayment tenure can be customised. Different banks have repayment durations ranging from 12 months to 7 years. 

How to Apply for a Corporate Loan?

To apply for a corporate loan, either of the following steps can be followed: 
Step 1: Do research and identify loan type and institution.
Step 2: Choosing the application manner. These can be - 
• Visiting the bank or financial institution in person
• If they allow corporate applications online, you could consider applying for the loan using the bank's website.
• Another option is to apply for a loan by contacting a Direct Selling Agent, or DSA.
• The fourth option is to visit a third-party website and compare different banks’ business loans. You can evaluate the various loan features and select the best fit for your needs. Once you've decided, you may apply online and have your loan handled through the third-party gateway.
Step 3: Check Credit Score
Step 4: Evaluate EMI
Step 5: Gather Documents
Step 6: Arrange Business Plan
Step 7: Submit Filled out Form

Conclusion

Corporate loans offer a range of advantages for any business. A thorough knowledge of corporate loan meaning, interest rates, and features is necessary to avail of the best-structured loan. This ensures that the company receives the proper support for expansion and profitability.