While running a business is your forte and you are familiar with all the contours of your business, it is possible you may get stumped when you approach Tata Capital for a business loan. You will encounter some new terminologies that you may not have heard before. You may find it difficult to understand some of the terms used in your loan approval process and the loan agreement. To help you understand the various terminologies used in availing a business loan the following glossary should come to your aid.
This is the amount of loan for a business you are eligible to avail. Typically, the lender would perform due diligence on your business to determine whether you are eligible for a business loan and if so what could be the amount. The business loan eligibility conditions could include the status of your business as a profitable and running business with profits for the last two financial years. Tata Capital offers business loans for amounts ranging from Rs 5 lakh to Rs 50 lakh based on the credential of your business.
Documentation is the process that enables Tata Capital to ascertain your business credentials. The various documents to be submitted include permission from statutory authority to run your business, income statements – balance sheet and profit and loss statements for the last two years, ownership documents to prove you are the owner, ITRs for last two years, certified bank statements for last six months and documents to prove your identity and address.
This is the length of time available to you to repay the loan for business. Tata Capital offers you tenure of 12-36 months to repay the loan.
EMI is an acronym for equated monthly instalment. EMI is the amount you pay every month to repay the loan. For ease of repayment and planning purposes EMI is a constant sum that you pay for the loan tenure. A Businessloan EMI comprises of two elements – amount adjusted against principal repayment and amount towards interest.
Business Loan Interest Rate
Interest is the charges that you pay to Tata Capital for their service of lending you money. Interest is typically a rate charged annually on the outstanding loan amount. Tata Capital business loans carry an interest rate of 19% and above based on your business credentials, ability to pay and Company Credit Report (CCR) among others.
Company Credit Report (CCR)
Any institution lending you money would want a third party to authenticate your business credentials before it determines your business loan eligibility. The Company Credit Report (CCR) serves this purpose. CCR is a report given by a credit bureau as to the status of your past and current loans. It does this by recording information on the loans you have taken submitted by lenders. It then consolidates the information into a CCR. The CCR helps Tata Capital to assess your creditworthiness usually through a score between 0 and 100. The closer you are to 100, your credentials are that much stronger and you can bargain for good terms with Tata Capital.
Working Capital Loan
This is a type of business loan extended to help you carry out your day to day operations. You will need funds to pay your monthly payments towards salaries, electricity, water, raw materials, Internet, telephones, rent and other day to day expenses. The working capital loan will allow you to make these payments to help you run your business comfortably.
This is another type of business loan that helps you to buy machinery required for the production of goods and services. This can also be utilized for replacing old machinery or effecting repairs to machinery.
An unsecured loan is one which does not ask for any type of security. The loan is extended based on your business credentials.
Sometimes, Tata Capital would require some form of security to protect its interest in the event you are unable to repay the loan. This protection is in the form of collateral security which can consist of hypothecation of land and building and other assets.
These are some of the business terminologies that you will encounter when you approach Tata Capital for a business loan. Don’t get intimidated by these terms. Everything is clearly explained in the loan documents andyou should read and understand them thoroughly before signing on the dotted line.