TERM LOAN START-UP LOAN WORKING CAPITAL LOAN LOAN AGAINST

• Loan could be secured or • A start-up loan is for new • Types of small business loans PROPERTY
unsecured in nature. business ventures. taken to overcome the > The applicant has to mortgage
• The amount available depends • Applicants for such loans may shortage of cash to operate a his/her property to avail of funds
on the business’s credit history. not have a great credit history business on a day to day basis. for business purposes.
• Tenure is fixed in nature, of their company due to lack of • It generates a balance in cash > Borrower can apply for funds
business vintage. flow necessary to run a
ranging between 1 and 5 years, • Thus, to judge the business
against either a commercial or
or up to 15-20 years for business. residential property.
loan eligibility, the lender will • Helpful to deal with a shortfall
secured business loans. take into account the > Lenders can finance up to 70%
• A Term Loan is taken for a borrower’s personal credit of cash during the off-season of the current market value of
specific purpose, generally for profile along with that of the or meet demand during a peak the property.
capital expenditure. company. season.
• Most eligible applicants are > The title to the property
• The lender disburses the • The current turnover figures
service providers, should be free from
approved fund in lumpsum and other financials are also
considered. manufactures, wholesalers, encumbrance.
amount.
• The business should be retailers or traders engaged in > Tenure of such loans is up to
established and the applicant exports and imports. 15-20 years, depending on the
must submit proof of the terms and conditions set by the
business existence and lending institution.
registration.
INVOICE FINANCING EQUIPMENT OVERDRAFT MERCHANT CASH
• It is also known as invoice FINANCING • A business overdraft is provided ADVANCE
discounting or factoring. upon holding fixed deposits with • > The merchant cash advance
• It is the manufacturing business a financial institution.
• This type of funding is that usually opt for equipment includes an advance of capital
• When offering this facility, the
especially for small business financing or machinery loan. provided on the daily sales of
lender analyses the business cash
that encounter a time lag • Manufacturing units require flow, repayment history, terms of debit and credit cards.
between raising invoices and costly equipment for the fixed deposits and more. • > This is why it is important to
receiving payments from the operation of their business and • With the overdraft, the borrower ensure that the business
clients. to purchase machines, out of all can secure the required amount includes enough cash flow to
• The financial institutions types of business loans, from the fixed deposit and pay service the repayments. When
equipment financing is the interest only on the amount that a business is doing well, the
provides funds against the preferred one.
amount raised in the invoice. is used. amount that can be repaid is
• This is because machinery loans • The funds can be used to serve
• The lender can finance up to much higher.
are specific in nature, wherein any purpose related to the
80% of the invoice amount. the equipment in question is • > The advantage of a merchant
• Once the business receives business. cash advance is that the
taken as collateral along with
the payment, it clears off the other security. person has to pay as per the
debt as per decided tenure • The interest rates could be daily sales.
and interest rate. lower than those charged on
term deposits.

•
LETTER OF CREDIT LOANS UNDER GOVT. SBA LOANS VEHICLE FINANCING
> Vehicle Loan is a loan that allows
• It is a type of credit limit used SCHEMES • Helps small businesses get funding
you to purchase two and four
majorly in trading businesses in by setting guidelines for loans and
• Government of India has initiated wheelers for personal use.
which the bank or lender offers a various loan schemes for individuals,
reducing lender risk.
• > Typically, the lender loans the
funding guarantee to enterprises MSMEs, women entrepreneurs, and These SBA-backed loans make it
that deal in international trade. easier for small businesses to get money (making a direct payment to
other entities engaged in trading,
• Letter of credit can be utilized for services, and manufacturing sectors. the funding they need. the dealer on the buyer’s behalf)
both import and export purposes • The loans under government • Competitive terms: SBA- while the buyer must repay the loan
by entrepreneurs. schemes are offered by various guaranteed loans generally have in
• Enterprises doing business financial institutions, such as Private rates and fees that are comparable Equated Monthly Instalments (EMIs)
overseas tend to deal with and Public Sector Banks, NBFCs, to non-guaranteed loans. over a specific tenure at a specific
Regional Rural Banks (RRBs), Micro • interest rate.
unknown suppliers, so for that, Counselling and education: Some
Finance Institutions (MFIs), Small
they require assurance of payment Finance Banks (SFBs), etc. loans come with continued support > The EMI comprises a portion of the
before performing any transaction. • Some of the leading Govt. Loan to help you start and run your principal amount and the interest
• Therefore, a letter of credit plays a schemes include business. component.
vital role in providing payment Mudra Scheme under PMMY, • Unique benefits: Lower down > Once you repay the loan in full, the
assurance to the suppliers PMEGP, CGTMSE, Standup India, payments, flexible overhead lender transfers the vehicle
Startup India, PSB Loans in 59 requirements, and no collateral
minutes, PMRY, etc. registration in your name.
needed for some loans.
EXAMPLE
EXAMPLE
VEHICLE
• A Vehicle Loan is a loan that allows you to purchase two and four
wheelers for personal use. Typically, the lender loans the money
(making a direct payment to the dealer on the buyer’s behalf) while the
buyer must repay the loan in Equated Monthly Instalments (EMIs) over
a specific tenure at a specific interest rate. The EMI comprises a portion
of the principal amount and the interest component. Once you repay
the loan in full, the lender transfers the vehicle registration in your
name.

• You can also apply for a Vehicle Loan to buy these vehicles to transport
goods or company personnel. Common examples of commercial
vehicles include buses, trucks, tractors, tippers, cabs, etc.

• Your eligibility for a Vehicle Loan depends on your credit score and net
(in hand) monthly income. Most lenders offer 75% to 100% of the
vehicle's on-road price, based on its type and price. You can also get a
loan to buy pre-owned cars and other previously used vehicles.
Types of Vehicle Loans in India
Today, you can take on a Vehicle Loan to buy various kinds of vehicles in India. Below are the most
common types of Vehicles Loans offered by Indian lenders.

• Car Loans
You can get a Car Loan to purchase a brand-new car of your preferred brand. Lenders generally offer up
to 90% financing of the car's on-road price, while you have to pay the remaining 10% as a down
payment. The on-road price of a new car includes the ex-showroom price, Regional Transport Office
(RTO) registration charges, insurance costs, road tax, etc. A Car Loan generally comes with a seven-year
repayment tenure. You can repay the Car Loans in affordable EMIs over your chosen tenure.

• Two-Wheeler Loans
A Two-wheeler is an excellent vehicle that allows you to navigate traffic, especially in a densely-
populated city. It is compact, requires less fuel and helps you cover shorter distances comfortably.
With Two-Wheeler Loans, you can buy geared motorbikes and non-geared scooters. Most lenders offer
up to 100% financing on Two-Wheeler Loans, with a maximum repayment tenure of five years. The
maximum financing offered on such loans is up to Rs 10 Lakh. Once again, you need to provide your
income proof and credit scores to be considered for this loan.

• Pre-owned Car Loans

Another type of Vehicle Loan you can opt for is a pre-owned Car Loan. Purchasing a pre-owned car is a
cost-efficient alternative to buying a brand-new car. Lenders generally offer up to 75% financing against
pre-owned cars. The car is hypothecated with the lender till the repayment period ends and you repay
all EMIs. However, the car's age and the new repayment period should not exceed eight years.
What Are The Features Of A Vehicle Loan?
The following are some of the salient features of a Vehicle Loan.
• High-value financing
Lenders usually offer vehicle financing starting from 75% to 100%. As such, you need not worry about
putting down hefty down payments.
• Competitive interest rates
Vehicle Loans are secured loans, i.e., the purchased vehicle serves as collateral with the lender until
you repay the loan in full. Due to this secured nature, lenders typically levy a lower interest rate
against these loans.
• Speedy disbursals
Lenders typically disburse the funds directly to the vehicle dealer, allowing you to purchase and
register your vehicle instantly.
• Flexible repayment terms
Repayment tenures range from a year to 84 months, depending on the type of Vehicle Loan you
need. Two Wheeler Loans and Commercial Vehicle Finance come with a five year repayment period,
while you can repay your new Car Loan over seven years.
• Eligibility criteria
You can apply for the loan as long as you can show the minimum net monthly income (across the
corresponding Vehicle Loan) and a good credit score exceeding750 points.
• Loan processing and prepayment
Lenders levy minimal loan processing charges against Vehicle Loans. You can also prepay your loan
before the stipulated tenure without incurring any penalties.
• Hassle-free documentation
Most lenders allow you to apply for a Vehicle Loan online without any physical documentation. You
only need to provide scanned copies of your ID, address, and income proof documents.
New Car Loan Vs Used Car Loan
You can choose between buying a new or used car using the loan facility. Here's how the two loans differ.
• Affordability and maintenance costs
Used cars are usually a lot more affordable and ideal for people who have recently learned to drive.
Depending on the age of the used car, it may require regular maintenance from time to time, which can lead
to added costs. A new car may seem expensive at face value. However, it typically runs smoothly for years
without incurring extra maintenance costs.
• Repayment tenure
The repayment tenure for a new Car Loan is longer than that for a pre-owned Car Loan. You can repay a new
Car Loan over the span of 84 months. However, the tenure for Pre-owned Car Loans is capped at 60 months.
• Warranty
New cars come with a free manufacturer warranty. The car manufacturer promises to repair the vehicle or
replace certain mechanical or electronic components of the car during the warranty period without levying
any additional costs. This warranty generally lasts for two to three years or up to a certain number of
kilometres driven. By the time the car is put up for sale, the manufacturer's warranty may end. Used cars
generally come without a manufacturer warranty. Depending on the car's age, you may obtain a warranty
for a used car, but you have to pay additional charges.
• Insurance premiums
Whether you own a new or a pre-owned car, you need to purchase car insurance per the Motor Vehicle Act
of 1988. New cars have a higher Insured Declared Value, i.e., is the maximum amount you can get when you
file an insurance claim. Due to a higher IDV, insurance premiums for new cars are higher than for used cars.
Insurers usually offer a lower IDV for pre-owned cars.
• Financing
Most lenders offer up to 90% of a new car's on-road price as the loan amount, thus reducing your down
payment considerably. For a used car, you can get up to 75% financing.
• Car's age
Pre-owned cars must fulfil specific criteria to be deemed eligible for purchase, one of which is the car's age.
Starting from the car's invoice date and including the repayment period, the age of the used car should be
no more than 96 months. This criterion does not apply to new cars.
AGRICULTURE EQUIPMENT FINANCING
Agriculture Equipment Finance deals with financing farmers for purchasing all the
necessary equipment. Farmers can buy new ones or lease them from agricultural
equipment finance companies like NAFA (Netafim Agricultural Financing Agency). If
you are new to this industry, you need to be well-versed in all aspects of it in order
to get off to a good start.

Agriculture equipment finance is available for

farmers who purchase or install small farm
equipment. Heavy-duty farm equipment is
generally not eligible.
To prevent delays, beginners should know the
details about such finance options. Here are some
basics about these:

General features:

Some basics you need to know about agriculture

equipment finance are as follows:

1. Tenure of the loan varies based on crop, but not

more than five years.
2. Interest rates can range from 7.5% to 17%, with
1% + GST as processing fees.
3. Customized repayment is allowed for agriculture
equipment finance. So farmers can repay in one or
more instalments as per the crop cycle or as
decided on a case-to-case basis.
4. Applying is quick and easy. Some agencies even
offer door-to-door services for collecting the
application.
Eligibility criteria:

The applicant’s minimum age should be 22 years old, and they should not be older
than 60 years. If an applicant is older than 60 years of age, a co-borrower is needed
during the loan application. There must be a minimum land holding of 3 acres.
Documents needed:

Some documents need to be submitted while applying for the

loan, which includes:

• Photo ID proof such as voter card, Aadhar card, valid

passport, PAN card, Gram Sevak, or ID proof by Panchayat.
• Address proof such as any of the above documents or
Rahivashi Dhakla issued by village sarpanch, updated bank
passbook of any nationalised or private bank showing the
current address, or an address proof issued by Gram Sevak.
• Proof of income such as the saving account passbook
showing the account details in the recent six months.
• The farmer attests farming land or property documents,
including the original 7/12 extract, 8Aextract, Ferfar(6D),
and Talati’s Boundary Map. The sub-registrar office must
also receive the government valuation report or market
valuation report.
Tips to follow while applying for Agriculture equipment finance:

1. Accessing the performance of your agricultural business:

Understand your agricultural business performance by closely looking at the current

functioning of the farm machinery, and also check the frequency of the repair works needed so
far. You must also consider the fuel price and contracts to allocate the correct required budget
for any additional machinery which has to be purchased. If there are any expansion plans for
the future, those need to be considered too.

2. Make a clear and concrete plan:

Future plans need to be refined to consider any repair or replacement required. So restructuring in
agricultural business can be well-defined. It will also consider the depreciation of existing machinery
and equipment. Thus one can know if new equipment needs to be purchased or it can just be leased
to fit the needs.
Tips to follow while applying for Agriculture equipment finance:

3. Check all available financing options:

There has to be some working capital fixed to help the agricultural venture flourish. Sometimes more capital needs to
be borrowed to cover necessities because of external conditions like harsh weather. There are numerous farm
equipment financing alternatives available. Before choosing one, consider whether you need to own the asset
mandatorily, whether you require a flexible repayment option, how you will deal with the issue if the interest rate
rises, and so on.

4. Seeking advice from experts:

When you are unsure of all the processes involved in agriculture equipment finance, then consult the agricultural financing
experts and explain to them your current agricultural condition and your budget to understand if purchasing new machinery
can be a profitable option. They might alternatively advise leasing the farm machinery based on your situation. But this
would help you flourish instead of breaking down before reaching the goal.
EXAMPLE
Farmers need funding for their machinery and equipment to progress in their business. When the new
machinery is unaffordable, they can rely on agricultural equipment leasing companies like
NAFA(Netafim Agricultural Financing Agency). New farm machinery is crucial for enhancing efficiency
and ensuring steady growth output. So it is important to have a clear idea of various aspects of
agricultural loans and agriculture equipment finance for a hassle-free experience while dealing with
agriculture equipment finance companies.

CONCLUSION
 TOP FIVE
IMPORTANT

REQUIREMENTS
LOAN PURPOSE

A FULL PROOF BUSINESS PLAN

BUSINESS LICENSES & OTHER LEGAL DOCUMENTS

THE DESIRED LOAN AMOUNT

REPAYMENT TERMS & PREPAYMENTY PENALTIES

STAGES IN PROCESSING A LOAN
LOAN PROTECTION INSURANCE
Loan Protection Insurance is designed to help
policyholders by providing financial support in times of
need whether the need is due to disability or
unemployment.

This insurance can help cover monthly loan payments and

protect the insured from default.

The loan protection policy goes by different names

depending on where it is offered. In Britain, it is often
referred to as accident sickness insurance, unemployment
insurance, redundancy insurance, or premium protection
insurance.

These all provide very similar coverage. In the U.S. it is

usually called payment protection insurance (PPI). The
U.S. offers several forms of this insurance in conjunction
with mortgages, personal loans, or car loans