Federal Bank Business Loan
Federal Bank is a leading Indian commercial banking institution in the private sector with more than 1,800 ATMs and 1,250 branches in the country. The bank is one of the pioneers in deploying technology across its operations and was one of the first Indian banks to fully digitize its branches.
Features of Federal Bank Business Loan
Given below are some of the features of a Federal Bank Business Loan:
- Flexible repayment options with tenure ranging up to 10 years.
- Minimal margin requirement on collateral.
- Attractive interest rates, starting at 11.10%.
- Hassle-free loan balance transfer options are available, subject to the applicant's eligibility.
- Quick processing and hassle-free disbursal of the loan amount.
- Simple assessment criteria.
Federal Bank Business Loan Eligibility Criteria
All individuals, self-employed professionals, MSMEs, Private and Public Limited Companies, Sole Proprietorship, Partnership firms, and any other business entity are eligible to apply for a Federal Bank Business Loan.
Federal Bank Business Loan Fees and Charges
Given below are the processing fees and charges of a Federal Bank Business Loan:
|Processing Charges||Up to 3% of the sanctioned amount|
|Prepayment or Pre Closure Charges||
|Late Payment Penalty||2% of the overdue monthly amount + penal interest applicable for SMA products|
|Fee for converting loan from fixed interest to floating interest||0.25% of the outstanding amount|
|CIBIL report charges||nil|
Federal Bank Business Loan Interest Rates
Given below are the interest rates for a business loan from the Federal Bank:
|Type of Loan||Interest Rate|
|Loans to applicants with a credit limit upto Rs 25 lakhs||11.10% to 14.25% p.a.|
|Loans to applicants with a credit limit above Rs 25 lakhs to Rs 2 crore||11.20% to 14.25% p.a.|
|Loans to applicants with a credit limit over Rs 2 crore to Rs 5 crore||11.80% to 13.30% p.a.|
|Loans to real estate developers over Rs 2 crore to Rs 5 crore||11.95% to 13.45% p.a.|
|Rent Securitization Loans||11.20% to 12.70% p.a.|
|Commercial Vehicle Acquisition Loans||9.95% to 11.25% p.a.|
|SHGs/JLGs/Kudumbasree Microcredit||12.50% p.a.|
|Loans under NRLM/NULM||12.50% p.a.|
|Loan under PM SVANidhi scheme||16.00% p.a.|
Factors Affecting Federal Bank Business Loan Interest Rates
Once you have acquired a business loan, you would be required to repay the amount in monthly payments. The EMIs you will be required to pay is composed of the principal amount and the interest applicable. The lender considers several factors before determining the appropriate interest rate for you. Some of the factors that affect a Federal Bank business loan interest rate are as follows:
Type of Business
The type of business is one of the main aspects affecting the interest rate of a business loan as it indicates your growth potential. Usually, lenders prefer businesses involved in industries that show a scope of expansion or a strong potential for steady returns.
On the other hand, businesses involved in seasonal industries, young organisations or companies in declining industries may be seen as a credit risk and be granted higher interest rates.
Cash Flow of the Business
The cash flow of a business is an indicator of how much money is involved in the business at any given point in time. This helps the lender gauge your income versus expenses and determine your profit potential.
Businesses that have a lower cash flow or frequently experience disruption are more likely to be unable to manage their expenses and repayments. In extreme cases, cash flow problems can also shut down businesses.
Therefore, most lenders verify your bank statements to understand the business's cash flow better. A strong and steady cash flow indicates that your business is not a credit risk, and you will be granted favourable interest rates.
Your credit profile is the primary factor a lender considers to determine your creditworthiness. Especially in traditional banking institutions, your credit score may determine if your application gets approved. Even if you get approved with a less than favourable credit score, it will have an adverse effect on your business loan interest rate.
A strong credit profile typically leads to a lower interest rate and favourable loan terms that will enable you to save more throughout the loan tenure. On the other hand, a weak credit profile means that it will be less likely for you to secure favourable interest rates.
Some businesses will try to delay acquiring a loan to improve their credit profile. This can be a good strategy to obtain better interest rates. However, this might also take a while to come into effect, which may not be feasible during a cash crunch.
Some banks or lenders may also require you to provide collateral as security for a business loan. Collateral can be described as an asset held by you or your business that can be used to underpin the loan. In case you are unable to make timely payments, the lenders have the authority to seize the asset to compensate for the loan amount.
Collateral can make your business appear less risky while also affording a certain level of security for the lender. Quite simply, putting up collateral can help lower the interest rate for your business loan. However, not all businesses may have assets large enough to qualify as collateral, particularly in the case of small or new businesses.
While collateral may help obtain a lower interest rate, it is associated with several risks. Most importantly, you run the risk of losing the asset you have provided as collateral if you cannot meet your loan obligations. If you've used your residence or crucial business equipment as collateral, you may end up being in an unwanted situation.
Usually, banks and lenders are hesitant to grant loans to businesses with multiple outstanding loans. This creates concern about the strength of the cash flow and the ability to manage additional payments for a new loan, leading to higher interest rates or even rejected applications.
Documents Required for Federal Bank Business Loan
Given below are the documents required to obtain a business loan from Federal Bank:
- Identity Proof (Passport/Voter ID card/Driving Licence/PAN Card)
- Address Proof (Ration card Tel/ Electricity Bill/ Lease agreement/ Passport/Trade licence/Sales Tax certificate)
- Bank statements from the previous 12 months
- Continuation Proof (ITR/Trade licence/Establishment/Sales Tax certificate)
- GSTR/Sales tax returns of partners/firms/companies as applicable
- Audited financial statements from the previous two years
- Financial projection statements
- Copy of business licence/NOC
How Does the EMI Calculation Work for Federal Bank Business Loans?
An EMI calculation before applying for a business loan is as imminent as it is time-consuming. However, with an online Federal Bank Business Loan Calculator, you will be able to calculate it instantly. Once you visit the page, enter your business loan amount, tenure and interest rate and click on Submit. The results will be on your screen in a jiffy.
But if you want to calculate your equated monthly instalments on your own or want to verify the automatically calculated figures, you can apply the below formula.
EMI = P × r × (1 + r)n/((1 + r)n - 1)
Here P is the principal business loan amount, r represents the interest rate applicable, and n is the number of EMIs you will have throughout the loan tenure.
How Does Federal Bank Compare With Other Lenders?
The table given below shows how Federal Bank compares with other business loan providers in the industry:
|Bank Name||Interest rate p.a.|
|Federal Bank||11.10% onwards|
|Kotak Mahindra Bank||14% onwards|
|Axis Bank||17% onwards|
|Fullerton Finance||17% onwards|
|Bajaj Finserv||17% onwards|
|Yes Bank||17% onwards|
|Tata Capital Finance||17% onwards|
|IIFL Finance||18% onwards|
|ICICI Bank||18% onwards|
|Lendingkart Finance||18% onwards|
|Hero Fincorp||18% onwards|
|Indifi Finance||18% onwards|
|NeoGrowth Finance||18% onwards|
|RBL Bank||19% onwards|
|IDFC First Bank||20% onwards|
|HDB Financial Services Ltd.||22% onwards|
|PNB Business Loan||Based on Business Profile|
|Bank of Baroda||Based on Business Profile|
Federal Bank Customer Care
In case you have any doubts or queries regarding Federal Bank Business Loan, you can get in touch with their customer care in the below mentioned ways:
- Toll-Free Numbers: 1800 – 425 – 1199, 1800 – 420 – 1199
- Email Address: [email protected]
- Postal Address: Federal Bank Head Office, P.B.No.103 Federal Towers, Aluva, Kerala, India – 683101
- Fax: 2622672
From refinancing to reducing your interest, we have the answers right here.
How many business loan products are offered by Federal Bank?
Federal Bank offers multiple business loan products catering to all industries. Some of the loan products offered are SME Parameterised Loan Scheme, SME Loan against Property, Business Loans for Professionals, Loan to Mobile/ DTH/Other electronic recharge vendors, Federal Goldsmiths Loan Scheme and General Credit Card Scheme.
What are the repayment modes for a Federal Bank Business Loan?
You can make the repayment for your Federal Bank business loan via cheque, automatic e-Nach EMI, ECS, net banking, etc.
What is the final interest rate for a Federal Bank Business Loan?
Even though the Federal Bank offers interest rates starting at 11.10% p.a., the interest rate that you receive may depend on several factors. Your credit score and credentials play an important role in determining your interest rate.
For what purpose can a Federal Bank Business Loan be availed?
A Federal Bank business loan can be obtained to meet business requirements like starting a new venture, expanding business, availing extra operational funds, starting new projects, etc.
How much EMI do I have to pay for a Federal Bank Business Loan?
The EMI amount you will be required to pay for your Federal Bank Business Loan depends on your loan amount, tenure and interest rate. The interest rate is dependent on your credit profile, nature of business, business cash flow and other such factors.
Does the Federal Bank check the CIBIL score while sanctioning a business loan?
Yes, the Federal Bank checks the applicant’s CIBIL score while sanctioning a business loan. Most banks and lenders consider the credit score to approve or reject the loan application.
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