Secured Business Loan Product Note

Purpose: Working capital, capex, expansion, project implementation, purchase of machinery/stock, refinancing of cost-effective liabilities, and general business needs.

Borrower Profile: Individuals (proprietors) and entities (Partnerships, LLPs, Pvt. Ltd. companies) falling under Small and Medium Enterprise (SME) category per GoI/Ministry of MSME classification.

Loan Type: Secured Term Loan

Security: Immovable property (residential/commercial/industrial) or stock (pledge/hypothecation). Addtional Security/Guarantees permitted.

Loan Amount: INR 10 lakh to INR 500 lakh.

Tenure: 12 to 60 months (with optional moratorium up to 6 months for capex/projects)

Interest Rate (Risk-based): 12% to 20% p.a. (fixed or floating; linked to internal PLR/benchmark). Rate varies by risk grade, collateral quality, LTV, financial metrics, and sector outlook.

Processing Charges: 0.5% to 2% of sanctioned amount (+ applicable taxes)

Repayment Frequency: Monthly EMIs/Structured instalments aligned to cash flow; bullet/step-up allowed for stock-backed cases subject to risk approval.

Prepayment/Foreclosure: Allowed; prepayment charges as per policy (e.g., 2–4% on principal outstanding (if paid in full or for the respective amount pre-paid) for first 24 months; waived if via own cash accruals—board approvable)

Penal Charges: Up to 3% p.a. over overdue amounts (policy-driven)

Other Charges: Valuation, legal search/report, documentation, insurance premium, stamp duty, CERSAI, credit bureau, ROC filing (if applicable), and any statutory fees as applicable on actual basis

The facility shall be extended for the purpose of funding business activities of eligible entities, including Micro, Small and Medium Enterprises (MSMEs) as well as non‑MSME entities. For MSMEs, registration on the Udyam portal is preferred; however, it is not mandatory if MSME status can be otherwise adequately evidenced. Eligible customer segments include:

Self-employed professionals

Self-employed non-professionals

Non-individual applicants – private limited companies, public limited companies, and partnership/LLP

Vintage: Minimum 2 years of operations

Compliance: Valid registrations, licenses, tax filings; adherence to legal/statutory requirements for the sector/activity.

Positive Cash Flow: Demonstrable positive operational cash flows for last 2 years.

Promoter Track Record: Satisfactory integrity, experience, margin contribution as per case

Primary Security: Property mortgage or stock hypothecation/pledge; third-party collateral acceptable case-to-case

Collateral Coverage (Indicative): Property LTV up to 60–70% of distress value; Stock LTV up to 50–60% of realizable value

Additional Comforts: Personal/corporate guarantees, escrow of receivables, assignment of key contracts

Insurance: Mandatory property/asset insurance with lender clause. In addition, Credit Shield Insurance (covering risks such as death, permanent disability, or critical illness of the key borrower/promoter, as applicable) to be mandated to safeguard loan repayment continuity.

Financials: Audited/CA-certified statements for last 3 years

IT returns (entity) for last 3 years

GST returns (GSTR-1, GSTR-3B) for last 3 years (or available period)

IT returns (promoter) for last 3 years

Bank statements for last 12–24 months.

Business Plan & Projections: 3-year plan with projections, assumptions, order book, capex schedule, working capital cycle.

Legal/KYC: Entity & promoter KYC, Udyam (if applicable), PAN, GST, CIN/LLPIN, MOA/AOA/Partnership deed, licenses & sector approvals

Collateral Documents: Title deed, chain/mother deed, tax receipts, layout/sanctions, valuation report(s), legal search report, NOCs, encumbrance certificate; For stock: stock statements, insurance, warehouse details, audit reports

Covenants/Undertakings: Undertaking for monthly MIS, stock statements, insurance assignment, intimation of material changes.

Applicants must completely provide all information required in the application form.

All the applicants to the case must sign the application forms.

The application form must include recent passport size photographs of the applicant which must be self-attested via a signature across the photographs.

The applicants need to provide documents for income proof as per the table below.