How does Business Loan for Manufacturers work?

Business loans allow manufacturers to avail financing from banks, Non-banking Financial Companies (NBFCs) and other lending institutions to meet their working capital, investment, and growth needs. Here is an overview of how business loans for manufacturers  work:

• Loan Amount: Manufacturers can typically avail loans from a few lakhs to a few crores depending on business revenues, collateral, credit score and repayment capacity.
• Interest Rates: Financial institutions typically charge 9-30% annual interest on these loans. Rates are competitive for businesses with good credit ratings.
• Tenure: Repayment tenure is typically 2 to 10 years. Longer tenure loans have lower EMIs, allowing better cash flow management.
• Collateral: Loan providers may seek assets like property, equipment or fixed deposits as collateral security, especially for larger loan amounts.
• Disbursal: The loan amount is disbursed to the borrower's account within a few days post-completion of documentation and processing.
• Repayment: Manufacturers pay Equated Monthly Instalments (EMIs) comprising principal and interest charges over the loan tenure. EMIs are fixed over the tenure.
• Prepayment: Loans can be prepaid fully or partially, though with certain charges to compensate the loan provider. This helps reduce interest costs.
• Penalty: Default on timely repayment of EMIs leads to additional interest and penalties being levied on the borrower.