How does pharmaceutical business loan work?

A pharmaceutical business loan generally provides financial assistance to individuals or entities in the pharmaceutical sector. Here’s how it typically works, explained step-by-step:

1. Understand Capital Requirements

First, thoroughly assess your short and long-term capital requirements. Exactly how much funding do you need immediately and over the next 3-5 years for expenses like inventory, equipment, expansions, and working capital? This clarity helps choose a suitable loan amount and tenure.

2. Choose the Right Loan Provider

Research various financial institutions offering loans for the pharmaceutical sector. Compare interest rates, eligibility policies, document requirements, disbursement timelines, and prepayment clauses. Interact with relationship managers to find a financial institution that understands your business model and needs.

3. Prepare the Loan Application

Collate all documents needed by the loan provider - business financials, projections, licences, Know Your Customer (KYC), bank statements. Draft a solid business case highlighting how additional capital will boost revenues and profitability. Submit the loan application with supporting documents to the banks or Non-banking Financial Companies (NBFCs).

4. Secure Loan Appraisal and Approval

The loan provider scrutinises your application and evaluates your historical financials, business viability, growth prospects, and collateral value before approving a suitable loan amount and repayment structure. You may be requested to provide additional clarifications or documents.

5. Complete Documentation Formalities

Legal and documentation processes involve signing a term sheet or loan agreement mentioning interest rate, tenure, and conditions, providing post-dated cheques or Electronic Clearing Service (ECS) mandate for Equated Monthly Instalments (EMIs), and mortgaging collateral assets. Ensure you understand all clauses thoroughly.

6. Receive Funds in Account

Once documentation is completed, the approved loan amount is directly credited to your current account. To avoid violations, use these funds only for agreed-upon business purposes.