Types of Corporate Loans in India and Abroad

In India, companies can opt for a Working Capital Loan, which allows them to borrow a large amount of money to meet their short-term financial needs.

A Working Capital Loan can be secured or unsecured, with the secured option requiring collateral such as property or assets.

In contrast, a Term Loan in India is a long-term loan that provides a lump sum amount to a company for a specific period.

Term Loans are often used for expansion, modernization, or to meet long-term financial requirements.

Overseas, companies can consider a Syndicated Loan, which involves multiple lenders providing funds to a single borrower.

Syndicated Loans are commonly used for large-scale projects or acquisitions, and can be secured or unsecured.

In the US, companies can also opt for a Line of Credit, which provides a revolving credit facility that can be used as and when needed.

A Line of Credit is a flexible financing option that allows companies to borrow and repay funds as per their cash flow requirements.

Corporate loans are a crucial financial tool for businesses, and understanding the different types can help you make informed decisions. A commercial loan is done between a bank and a business, used to fund operating costs and capital expenditures.

There are several types of corporate loans, each with its own unique characteristics. Three of the most common types are lines of credit, term loans, and commercial mortgages. These types of loans are often secured, meaning that they're backstopped by physical collateral.

Here's a breakdown of the main types of corporate loans:

Commercial loans are a type of corporate loan that can help businesses meet their short-term funding needs. They're often used to fund operating costs and capital expenditures, and can be secured with collateral such as property or equipment.

Most commercial loans are short-term, but they can be "rolled" or renewed to extend the life of the loan. Companies generally have to provide financial statements to prove their ability to repay.

Commercial loans can be used for a variety of business purposes, including funding for payroll, supplies, and equipment purchases. They can also be used to acquire other businesses or business divisions.

There are several types of commercial loans, including lines of credit, term loans, and commercial mortgages. Acquisition loans, for example, are used by businesses that are buying other businesses or business divisions.

Here are some key highlights of commercial loans:

In some cases, commercial loans can be used as a "bridge" to help businesses finance short-term needs until they can secure a longer-term loan. For example, a business might use a commercial bridge loan to fund the acquisition and renovations of a property, with the intention of refinancing into a traditional mortgage once the renovations are complete.

Equipment finance can help your business buy new or second-hand plants or machinery. This corporate credit product serves as a valuable solution for companies looking to acquire costly equipment.

The machinery itself serves as collateral under equipment finance, providing security for the lender. This means that if you default on the loan, the lender can seize the equipment to recover their losses.

Equipment finance can be used to finance non-current, capital assets like equipment. This is similar to a term loan, but with one key difference: the equipment finance firm retains the legal title of the physical asset.

Here are some key points to consider when it comes to equipment finance:

Mezzanine Loans can be a valuable option for businesses looking to access capital.

Commercial mezzanine loan lenders offer a range of financing options, such as Apollo Global, Barings Real Estate, and Goldman Sachs.

You can find a list of these lenders through resources like Commercial Mortgage Alert.

It’s essential to find a lender that is familiar with various programs to secure the best possible deal.

Conduit loans are a type of commercial mortgage that's pooled with other similar loans and sold on secondary stock markets to institutional investors.

These loans are backed by a pool of other commercial mortgages, which minimizes risk and makes them more accessible to entrepreneurs and business owners.

Conduit loans typically offer lower fixed interest rates compared to traditional commercial real estate loans.

One of the benefits of conduit loans is that you don't have any minimum prepayment requirement, thanks to the option of defeasance, which allows you to pay off the loan without penalty.

Multifamily Loans are a type of corporate loan that can be tricky to qualify for, especially when the property has 5 or more units.

They usually require financing with higher loan limits, often upwards of $5 million.

A commercial loan for a 5+ unit multifamily property can be offered by both traditional banks and private lenders.

Traditional banks may want the borrower to have an excellent credit score and sold personal financials, and preferably an established relationship with the bank.

The good news is that the multifamily market has become extremely popular, making it easier to partner with an advisor who can guide you through the investment process and connect you with the right lender.

Government schemes and programs can provide significant benefits to businesses in need of funding.

There are various government schemes that offer loans to businesses at subsidized rates and with easy eligibility criteria.

Some of these schemes include the Pradhan Mantri Mudra Yojana, which provides loans to small businesses, and the Stand-Up India Scheme, which aims to promote entrepreneurship among women and SC/ST communities.

The Credit Guarantee Fund Trust for MSE and Co-Lending Model (CLM) are other government-backed schemes that offer loans to small and medium-sized enterprises.

If you're a small business owner, consider exploring these government schemes to access funding at subsidized rates.

Commercial hard money lenders are a type of alternative lender that can provide short-term capital for commercial real estate transactions.

These lenders offer a source of last resort, providing loans that are secured by commercial real estate as collateral. They have lower underwriting standards, but quick turnaround times, making them ideal for borrowers who need to move quickly.

Examples of nationwide hard money lenders include LendTerra, Prescient Capital, Ajax Funding, and Pender Capital.

Hard money loans are an alternative form of capital that's provided outside of traditional lending channels.

Hard money loans are secured by using commercial real estate as collateral, making them a source of short-term capital for individuals who need to move quickly.

Unlike traditional loans, hard money loans have lower underwriting standards, but in exchange, they have quick turnaround times, often releasing funds within a week.

Hard money lenders focus on the value and equity of a property rather than the creditworthiness of the borrower, which can be a blessing for those with less-than-perfect credit.

These loans tend to be used in high-risk situations or when traditional financing isn't an option, making them one of the higher-cost forms of capital with interest rates typically ranging between 10% and 20%.

Commercial hard money lenders include examples like LendTerra, Prescient Capital, Ajax Funding, and Pender Capital, which offer nationwide hard money loans.

Most big American banks offer conventional commercial mortgages, including JPMorgan Chase, Wells Fargo, Capital One, and Bank of America.

Lenders for commercial bridge loans are harder to come by, but companies like Century Capital Partners and Avatar Financial Group offer these loans.

Many big banks, such as Wells Fargo and JPMorgan Chase, also provide SBA 7(a) and SBA 504 loans.

Commercial hard money lenders include companies like LendTerra and Prescient Capital, which offer these loans nationwide.

You can find a list of commercial mezzanine loan lenders through Commercial Mortgage Alert, which includes examples like Apollo Global and Barings Real Estate.

Finding a lender adept with various programs is key to securing the most appropriate and lowest-cost capital for your needs.

A corporate loan can be a game-changer for your business, providing the funds you need to expand operations, manage working capital, or fund new projects. You can take a corporate loan or an MSME loan to support various business needs.

The application process for corporate credit loans is straightforward and takes just 5 minutes. Ensure you have all the necessary documents ready while filling out your application. This streamlined process allows you to get back to running your business quickly.

Some corporate loan lenders offer a dropline overdraft facility, which can help you manage your cash flow more effectively. Under this arrangement, the lender opens a separate current account for the corporate loan amount, allowing you to pay interest solely on the borrowed sum.

The amount and tenure of a loan can greatly impact your financial obligations and overall cost. A larger loan amount typically comes with a higher interest rate, as lenders view it as riskier.

The interest rate is directly tied to the loan amount, with larger amounts resulting in higher interest rates. This is because lenders see larger loans as riskier, even if you have a good credit score.

Your loan tenure, or repayment period, also plays a significant role in determining your monthly obligations. Choosing a lengthy repayment period will result in smaller monthly payments, but you'll end up paying more in interest overall.

To illustrate this, consider the following:

The key takeaway is that a larger loan amount often means a higher interest rate, while a longer repayment period results in smaller monthly payments but more interest paid overall.

A corporate loan can be a game-changer for your business, providing the necessary funds to take it to the next level. You can use a corporate loan or an MSME loan to support various business needs, such as expanding operations, buying equipment, managing working capital, or funding new projects.

One of the best things about corporate loans is the flexibility in repayment terms. You can decide the payback period according to your needs, choosing a shorter tenure if your profits are strong enough to save on interest. A corporate credit loan repayment term usually ranges from 12-36 months, but some products can go over 60 months.

The application process for corporate credit loans is quick and straightforward, taking just 5 minutes to complete. Make sure you have all the necessary documents ready while filling out your application.

With advanced AI and machine learning technologies integrated into their credit evaluation systems, corporate loan lenders can process loan applications quickly, ensuring timely access to funds. This means you can get the money you need to grow your business without unnecessary delays.

Some online business loan providers offer a dropline overdraft facility, which allows you to pay interest solely on the borrowed sum. This can be a big help in managing your cash flow and keeping your business running smoothly.

Interest on a corporate loan is tax-deductible when recorded in your business financials, and the loan proceeds do not fall under taxable income. This means you can fund operations without facing additional tax liabilities.

Here are some key features of corporate loans:

When applying for a commercial loan, your creditworthiness is a top priority for lenders. They'll want to see that your business has a favorable and consistent cash flow, which is usually proven through balance sheets and other financial documents.

Lenders typically require monthly financial statements from your company throughout the loan duration. This helps them stay on top of your business's financial health.

The interest rate on a commercial loan is usually tied to the prime lending rate at the time the loan is issued. This means you can expect to pay a rate that's in line with the current market conditions.

Banks often require you to take out insurance on larger items purchased with loan funds. This adds an extra layer of protection for the lender in case something goes wrong.

To get a corporate loan, you'll need to provide a range of documents to the lender. These typically include your business registration documents, such as a Certificate of Incorporation, Memorandum of Association, and Articles of Association.

Business registration documents are usually the first step in the loan process. You'll also need to provide financial statements, including audited Profit and Loss Statements, Cash Flow Records, and Balance Sheets for the past two years.

The loan application process involves several steps, including loan origination, client discovery and credit structure, analysis and underwriting, documentation and perfecting security, and finally, the loan is advanced and the borrower gets access to the loan proceeds.

Here's a summary of the documents you'll need to provide:

To get corporate loan approval, you'll need to gather a range of documents. This includes your Business Registration Documents, which typically include a Certificate of Incorporation, Memorandum of Association (MOA), Articles of Association (AOA), and Partnership Deed, depending on your business entity.

Audited Financial Statements are also required, covering your Profit and Loss (P&L) Statements, Cash Flow Records, and Balance Sheets for the past two years. This helps lenders assess your business's financial health.

Tax Returns are another essential document, with the last two years' income tax returns filed by your business, partners, or directors, as applicable. This shows your business's tax compliance and helps lenders evaluate your creditworthiness.

A detailed Business Plan is also necessary, outlining the purpose of the corporate loan, how you'll utilise the funds, and the projected outcomes. This demonstrates your business's strategic direction and financial management.

To verify your identity, lenders will require Know Your Customer (KYC) documents, including an Aadhaar card, PAN card, and passport-sized photographs. This ensures that you and your business are legitimate and trustworthy.

You'll also need to provide Proof of Address, such as utility bills, lease agreements, or property papers, to establish your business's registered address. This helps lenders understand your business's location and operational setup.

The Loan Application Form, which is provided by the lender, must be duly filled and signed. This initiates the loan application process and provides essential information about your business and loan requirements.

If your business has a board, you'll need to obtain a Board Resolution, which authorises the borrowing of the loan. This document demonstrates your business's decision-making process and commitment to the loan.

If you're offering collateral for the loan, you'll need to provide Collateral Documents, such as property deeds or asset ownership papers. This ensures that the lender has a secure interest in the collateral and can recover their investment if the loan defaults.

The loan process is a series of steps that lenders follow to approve and disburse a loan. The Commercial Loan Process is made up of 5 distinct steps.

Loan origination is the first step, where the relationship team goes out and prospects for potential borrowing clients. This involves finding businesses that may need a loan.

Client discovery and credit structure is the second step, where the team of lenders, including the relationship manager and the credit analyst, seek to understand the health of the business and its specific borrowing needs. They also consider how the deal might be structured and priced.

Analysis and underwriting occurs once the team has secured the client's commitment to move forward on a formal credit application. At this stage, the bank's adjudication team (or credit committee) must provide final approval of the proposed credit structure.

Documentation and perfecting security begins once the deal has been approved, the loan agreement executed, and any liens against the business and its assets registered correctly by the lender's counsel.

The loan is advanced and the borrower gets access to the loan proceeds, which is the final step in the process.