We have "Commercial Loans" for you
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As we talk about vehicle purchase everyone needs for private use and for commercial use. Most people were unaware of the process to buy commercial vehicles. Before we start, let's discuss why and who needs a commercial vehicle. The commercial vehicle is owned by a self-employed person to increase its business productivity. Now an individual can’t afford to buy multiple vehicles for that person to take help from market lenders who provide commercial vehicle loans. Yes, you heard it right there is a loan for commercial vehicles too.
A commercial loan is a loan that is extended to businesses by a financial institution. Commercial loans are generally used to purchase long term assets or help fund day-to-day operational costs.
1. Commercial loans are provided to a business entity and not to individual consumers.
2. They can be utilised by organisations to handle financial expenses such as purchasing equipment, buying and installing machinery, purchasing inventory, buying office furniture, purchasing vehicles for company purpose, construction, renovation of office location(s), etc.
3. Commercial loans can be secured or unsecured in nature.
4. Commercial loans are provided for a short period. This can range from 30 days to 1 year. It is sometimes given for a longer tenure too. This will depend on the lender. When you apply for commercial equipment loans or commercial construction loans, you can choose a longer tenure for up to 4 or 5 years.
5. Commercial loans can cover revolving lines of credit, short-term debt, long-term debt, etc.
6. Commercial loans are offered at fixed interest rates or floating interest rates.
7.You can repay a commercial loan through post-dated cheques, Electronic Clearing Service (ECS), Standing Instruction (SI), etc.
8. Commercial loans also help companies in purchasing supplies, buying raw materials, funding production processes, handling payroll needs, etc.
9. These loans will be commercial mortgage loans that help a firm in purchasing commercial properties.
10. Commercial loans are sometimes provided to self-employed professionals or non-professionals so that they can purchase property or any other asset for their firm’s requirements.
11. These loans can be utilised for expanding company operations too.
1. Expanding of Business
Small businesses which have a business model already established with a decent history of transactions can avail the commercial loans to prepare themselves for their next phase of business expansion. Whether they want to expand it across new locations or reach out to the new target audience, these loans would help them make their operations smooth.
2. New Technology and Tools
Small businesses that are looking to purchase new equipment and machinery for carrying out their operations can avail the equipment loan. Banks offer commercial loans especially for purchasing new and costlier equipment which can help businesses in increasing their productivity and giving them a competitive edge.
3. Managing Inventory
When taking up big business orders, especially of manufacturing companies, companies require readily usable raw materials. Commercial loans can prove to be beneficial in such situations and help businesses to buy essential inventory at the right time.
4. Raising Working Capital
Maintaining a working capital is crucial to meet all the daily requirements of cash and expenditures to be able to sustain in the market. Commercial loans help in making a perfect balance between keeping liquid cash for daily operations and meeting unforeseen expenditures.
The eligibility criteria required is different for different service providers. However, there are some basic criteria that must be met to avail commercial loan benefits.
1. Partnership firms, sole proprietorship firms, public limited companies, private limited companies, and self-employed professionals and non-professionals can apply for commercial loans or business loans in India.
2. The business entity that needs a commercial loan should have a good turnover. The turnover requirement will differ from lender to lender. You can check with your lender.
3. Each loan applicant should meet the minimum annual income requirement as a firm.
4. The firm should have been making profits for a certain period, which will be specified by the lender.
5. The company interested in a commercial loan should have been in business for a certain period, which will be mentioned by the lender.
6. The minimum age criterion for an individual who is applying on behalf of his or her firm is typically 21. The maximum age requirement is 65 years. This can change from lender to lender.
While applying for a commercial loan, a firm or individual will have to compulsorily submit certain documents to the lender and they include:
PAN card for firms, companies, and individuals
VAT or GST statements for a certain period
Balance sheet
Income tax returns for a certain period
Profit and Loss statement for a certain period
Bank statements for a certain period
Proof of continuation in business. The company can submit trade licenses, sales tax certificates, Income Tax Returns, establishment certificates, etc.
Certified Copy of Partnership Deed
Sole Proprietorship Declaration
Board resolution
Certified true copy of Memorandum and Articles of Association
Commercial Loan Process for Securing
Depending on the lender, the process to secure a commercial loan may be different. The general process for securing such a loan is as follows:
1. Pre-approval (Qualifying process)
The lender (bank) will begin a pre-approval process for the business by evaluating the financial history and income of the business. In addition, the lender will investigate the existing debt of the business and purpose for the loan. Through a pre-qualifying process, the lender can gain a rough idea of how much the business would be able to borrow and the riskiness of the borrower.
2. Loan application
After the pre-qualifying process, the business must complete and submit a loan application. In the application, financial statements or similar documents dating back at least three years are generally required. This is to help ensure that the business can repay back the loan.
3. Review of the loan application
Once the application is submitted, a loan officer will review the application. The loan officer will investigate things such as credit history, available collateral of the business, the current and projected income of the business, etc.
4. Loan underwriter/Loan committee
If the loan application is approved, it is forwarded to a loan underwriter or loan committee. The loan underwriter reviews all relevant information and decides whether to approve or deny the loan. The process can take up to a week, and the business may be required to provide additional documentation during the review.
5. Term sheet
If approved, the processor will present the company with a term sheet. A term sheet is a formal document that outlines the parties involved, amount of financing, available collateral, fees, use of the loan, and the interest rate on the loan. After reviewing the term sheet and signing a letter of intent, payment may be required for third-party reports, e.g., appraisal reports.
6. Loan package and closing documents
Upon completion of third-party reports, the complete loan application package is resubmitted to the loan underwriter for final approval. If approved, the business is required to sign finalized loan documents. Generally, businesses employ a closing agent (e.g., an authorized representative, an attorney, etc.) who handles all closing documents and completes any remaining paperwork.
These are the following types of commercial loan i.e. :
1. Term Loan
A term loan is simply a loan provided for business purposes that needs to be paid back within a specified time frame. It typically carries a fixed interest rate, monthly or quarterly repayment schedule - and includes a set maturity date.
2. Bank Overdraft Facility
A Bank Overdraft Facility refers to the ability to draw funds greater than are available in the company's current account. The actual size of the facility and the interest to be paid on overdrafts is typically agreed to prior to sanction. An overdraft facility is considered as a source of short term funding as it can be covered with the next deposit.
3. Letter of Credit
A letter of credit is a document issued by a financial institution assuring payment to a seller provided certain documents have been presented to the bank. This ensures the payment will be made as long as the services are performed (usually the dispatch of goods).
4. Bank Guarantee
A bank guarantee is a 'letter of guarantee' issued by a bank on behalf of its customer, to a third party (the beneficiary) guaranteeing that a certain sum of money shall be paid by the bank to the third party within its validity period on presentation of the letter of guarantee. A
5. Lease Finance
Lease Financing is a modern financing method that allows individuals or companies to own and make use of certain assets for medium to long term financing periods in return for previously - set interim payments. The lessor, who is the finance company, purchases the assets and becomes its legal owner.
6. SME Collateral free loan
This is usually a business loan offered to SMEs and is collateral-free or without third party guarantee. Here the borrower is not required to provide collateral to avail the loan. It is made available to SMEs in both the start-up as well as existing phases to serve working capital requirements, purchase of machines, and support expansion plans.
7. Construction Equipment loans
Construction Equipment loans are provided for purchase of both new and used equipment like excavators, backhoe loaders, cranes, higher end construction equipment etc. The tenure of such loans vary from 12 to 60 months depending upon the deal and nature of repayment capacity.
8. SME Credit Card
A SME Credit Card is a loan type that is made available either in Cash Credit or in Term Loan - type, the quantum of credit being up to 10 lakhs. This loan facility can be used by small industrial units, small retail traders, small business enterprises and transport traders. The repayment period for Term Loans is 5 years and 3 years for Cash Credit.
9. Commercial Vehicle Loans
Commercial Vehicle Loans enables a borrower to purchase vehicles like trucks, buses, tippers, light commercial vehicles. The tenure of such loans vary from 12 to 60 months depending upon the deal and nature of repayment capacity.
Commercial Vehicle Tips for Buying
Many Auto manufacturers sometimes attract companies or individuals looking for vehicles to use for business. Commercial auto manufacturers can offer cash discounts or lure to attract business owners. This can give you a great deal on a vehicle. If you want to buy multiple vehicles for your company, many car manufacturers offer a huge discount. If you want to buy around 5 to 10 vehicles, you may qualify for discounts. This may also provide you the prospect to configure your vehicles to your requirement as part of your overall auto purchase. There may be other financial incentives for your business if you are looking to purchase commercial vehicles, so ask around to different manufacturers before taking a commercial loan.
Checking financing status
On the time of buying a commercial vehicle, you want to make sure that you have a good interest rate for any loans you might take out on vehicle purchases. Get tax incentives probably from your state for small businesses, which could cut down on the money you end up spending on a commercial vehicle. You could also be able to deduct your loan finance charges and fuel and maintenance costs on your taxes.
The registration of your commercial vehicle may be under your business’s name, rather than your own. If you are directly financing your commercial vehicle purchase, then there are a few things that will be different than when you buy a private vehicle for yourself.
If you want vehicles for a small business, keep in mind that you are working with a bank that is used to working with business vehicle loans. Keep yourself well informed about the loan and make sure that you have the right commercial vehicle insurance that will cover your vehicles.
Choose Best Suited Vehicle
Before entering into the vehicle market, you must be aware of what kind of commercial vehicle you need. You may need a delivery truck, a panel van, or a regular pickup truck or car. Some car dealerships might not be prepared to deal with small business financing, or they may not be able to modify your vehicles in the way you need them. You can also go for used commercial vehicles that may already have been modified for business use. This could save you time and money renovating another vehicle for your business’s needs.
There are two ways to apply for a commercial vehicle loan that is :
1. Offline Method : By visiting nearest bank branch
2. Online Method :
Visit Dealership office near you or apply online
After visiting there fill the application for a commercial vehicle loan
After that read all financing-related documents carefully
Attach all required documents with an application form
Now submit the application form to the dealers
Sooner you will get the reply i.e. you are eligible or not for the loan
If your application form gets accepted you will get the loan in no time.
If your form is rejected then they provide a proper answer for that.
Before you apply for a commercial loan , check your monthly payments along with the total amount payable using an EMI Calculator. A commercial loan calculator is an online tool which computes your loan EMIs as per the details you provide.
This EMI calculator uses a mathematical formula to give you the amount of commercial loan EMI payable by you.
The formula is
E = P * R * (1+R)^N / ((1+R)^N-1),
where E is EMI,
P signifies principal amount,
R stands for rate of interest,
N stands for the tenor of your loan in months.
Bank offered Financial Products
There are following documents are required for commercial loan i.e. :
Documents required for commercial vehicle loan are – ID proof
Residence and office address proof
Asset proof and loan repayment records (if applicable)
Additional documents for guarantor
No. Experience proof is required which can be validated from deployment letter/Driving license/Commercial Vehicle ownership.
A commercial loan is a loan that is extended to businesses by a financial institution. Commercial loans are generally used to purchase long term assets or help fund day-to-day operational costs.
There are two ways to apply for a commercial vehicle loan that is :
Offline method by visiting nearest bank branch
Online method through website
No.A bank account is mandatory. In case you don’t have a bank account, you can apply for a new bank account which will be considered even if it has no recent transactions.
This EMI calculator uses a mathematical formula to give you the amount of commercial loan EMI payable by you.
The formula is E = P * R * (1+R)^N / ((1+R)^N-1),
where E is EMI,
P signifies principal amount,
R stands for rate of interest,
N stands for the tenor of your loan in months.
Yes. You can prepay the loan any time after 6 months of taking the loan with a 5% prepayment fee on the outstanding loan amount.
Last Updated on : 04/Nov/2020Know More About
You're eligible for a Commercial Loans if you:
Are legally adult enough to handle it
Have still got it
Get a regular pay check
Make more than a basic buck
Your eligibility depends on:
Earn more than minimum income required
Maximum allowed Commercial Loans is Rs. 10K to Rs. 45 lakhs
EMIs of other loans loweryour eligibility
Boost your eligibility by:
Pay off your credit card bills
Choose longer tenure loan up to 5 years
Nothing gets done without that paperwork (which we'll happily carry over to the bank for you, no sweat). Here's what you'll need:
- 1. Photo ID and age proof
- 2. Signed application form with photograph
- 3. Residence proof
- 4. Last 6 months bank statement
- 5. Documentation for salaried applicants:
- Last 3 months salary - slips
- Form 16 or Income Tax Returns
- 6. Documentation for self-employed applicants:
- Last 3 years Income Tax Returns with computation of Income
- Last 3 years CA Certified / Audited Balance Sheet and Profit & Loss Account
Updated on 25 Nov 2017
| Commercial Loans Details | |
|---|---|
| Interest Rate (Monthly reducing balance) | 8.3% - 14.52% |
| Processing Fees | Varies with bank |
| Loan Tenure | 1 year to 5 years |
| Pre-closure Charges | Varies with bank |
| Guarantor Requirement | Varies with bank |
Commercial Loans EMI Calculator