The way the economic growth story is panning out in India, the MSMEs would play a dominant role in contributing to the overall expansion of the Indian economy. However, a potential constraint for these medium and small enterprises is the want for capital to cater to the financial needs of their business.
The most common and easily securable source of funding is Loans from Banks and other Financial Institutions. Shriram City Union Finance is one such trusted name across India, helping Micro, Small and Medium enterprises fulfill their funding requirements. Shriram City Union's Business Loan offerings enable borrowers to tackle the business's working capital requirements. In addition, they would allow companies to acquire assets like machinery, plant and equipment, and other infrastructure assets for business expansion.
Once the borrower applies for the loan, they are generally concerned with the rate of interest on the Business Loan since that would impact the cash outflow of the business in the form of interest payments. Shriram City Union offers competitive interest rates based on the credit profiles of the borrowers. Therefore, the interest component forms a significant portion of this cash flow outlay.
However, a borrower also needs to understand that the interest payment is not the only charge that he/she has to pay for borrowing the money. There would also be Other Charges on Business Loans and GST Charges which the Banks/Financial institutions may charge. A few are listed below
The Banks/ financial institutions levy processing fees for processing business loans. It covers the essential cost of processing the loan application. It is a one-time fee charged at the initiation of the loan. The fees charged can vary from bank to bank depending upon the type of loan, quantum, the creditworthiness of the borrower, relationship with the borrower. For example, Shriram City Union charges Processing Fee as low as 2% and even less. The NBFC doesn’t levy disbursement charges on business loans separately as it forms part of the processing fees.
Documentation charges are costs related to the drafting and vetting of all the legal documents necessary before the credit facility's disbursement. For example, after sanctioning the Business Loan but before the disbursement of the facility, the lenders undertake vetting of various Documents Required for the loan such as Mortgage property papers, KYC of the Business owner, and other documents.
The lenders may also appoint an empaneled advocate to carry out the vetting task and draft the loan-related documents. Documentation charges cover all these costs. Banks/ financial institutions charge them on an actual basis or a lump-sum amount based on the expenses incurred, payable by the borrower.
Inspection charges are out-of-pocket expenses incurred by the bank for inspecting the property/asset proposed to be mortgaged with the lenders. The officers of the processing branch may visit the properties offered to be mortgaged, place of business, factory premises, corporate office before the disbursement of the sanctioned facilities. They recover the costs related to such a visit from the borrower. The levy of these charges is on a lump sum basis.
The lenders charge commitment charges in case the borrower fails to avail of the loan sanctioned to him. After approving the loan, the lenders earmark the funds exclusively for the borrower, which the lenders expect the borrower to utilize. However, the lenders may waive the commitment charges if the total utilization exceeds a confident % of the loan sanctioned, say 75% or more, depending on the lender.
Shriram City Union helps the MSME businesses with disbursements up to INR 1 Crore. An accurate assessment of the loan requirement by Shriram City helps the borrowers efficiently utilize the borrowed amount and avoid any commitment charges.
The loan agreement specifies the business loan tenure within which the borrower has to draw down the loan amount and repay the same to the bank. However, the lender may levy foreclosure charges if the borrower repays the business loan through a single bullet payment before the scheduled repayment timelines. The foreclosure charges for Shriram City Union can range anywhere between 3% - 6% of the prepaid amount. The foreclosure charges may vary on a case-to-case basis depending upon the loan amount standing, the balance tenure of the loan, to name a few. Lenders may waive these charges if the foreclosure is from the internal accruals of the business.
Review/renewal charges cost related to the annual review/renewal of the loan facilities already sanctioned by the lender. For example, one has to review Business Loans and working capital facilities every year to protect the lenders from mitigating the credit risk. These are generally in the range of 1% - 2% of the sanctioned facilities and are akin to Processing Fees.
The lenders' levy-Penal interest charges in case the borrower defaults in repaying the debt. The lenders can levy these charges even in breach of any conditions mentioned in the loan agreement. Since these charges are pretty high, a borrower must ensure timely repayments to avoid penal interest charges.
Shriram City Union provides flexible tenure from a minimum of 12 months to a maximum of 60 months tenure. They also provide interim funding to address the financial problems faced by any borrower. The borrower must Calculate their EMI and align their cash flows, enabling them to repay the loan on time. In doing so, one can avoid any Penal Interest Charges due to default.
As one may comprehend, apart from interest payments, there are various other charges which a borrower may critically evaluate before taking a business loan. Therefore, a borrower must thoroughly read all the conditions before accepting the sanction of the business loan.
Shriram City business loan charges are attractive amongst other lenders. In addition to the competitive pricing on Interest & Other Charges, they also provide Product Features like easy availability of loans, fast and secure processing, flexible tenure, and easy repayment. The NBFC offers these business loans to support Micro, Small, and Medium Enterprises.
The Borrowers can check their eligibility considering the overall requirements of the Small Business Owners. The eligible borrowers can then apply through the Online portal of the Company. Once the application is submitted, a customer relationship manager would call the borrower. The borrower can also access the Shriram City Union Finance's vast network of about 947 branches.
With the digitalization and changing dynamics of how banking would occur in the coming time, this trusted NBFC has made the entire borrowing journey ever so easy. The online processes complement the vast network of branches and facilitate quick approval and a seamless journey throughout the loan cycle.