ESOP Financing FAQs

Know the answers to all common questions related to ESOP Financing

Frequently asked questions

What is ESOP financing?

ESOP stands for Employee Stock Option Plan that gives the workers a benefit of ownership interest in the company. A lender funds an employee to exercise his/her vested shares under Employee Stock Option Plan by asking to pledge those receivable shares at the time of allotment.

Who is eligible for obtaining finance for ESOP?

Any employee of the companies approved by Bajaj Finance Limited can avail of funds for ESOP.

What are the minimum and maximum loan amounts for ESOP finance?

The minimum and maximum loan amounts for ESOP finance are Rs. 1 Lakh and Rs. 175 crore, respectively.

What is the margin that you consider for ESOP financing?

Bajaj Finance provides the loan up to 50% of the ESOP value.

What is the tenure for ESOP financing?

The tenure for ESOP financing ranges from 7 days to 36 months.

What are the charges for availing of ESOP financing?

Here are the charges to avail of ESOP financing:

  • Rate of interest
  • Processing fees
  • Pledge/ unpledged charges
  • Demat account opening charges
  • AMC charges for Demat account
  • Documentation charges
What is the process for availing of ESOP financing?

The employee needs to fill up the loan application form, and the new Power of Attorney (POA) based Demat account form and submit them to Bajaj Finance Limited.

  • The employee has to submit their ESOP grant letter issued by the employer.
  • Bajaj Finance will check/verify the documentation and open the loan account plus a POA Demat account for ESOP finance.
  • The employee will have to submit a pledge form, duly signed, to Bajaj Finance Limited.
  • Bajaj Finance will calculate the loan eligibility amount and inform the employee of the same.
  • The employee should mention the POA Demat account number created for ESOP financing and initiate the application to exercise ESOP.
  • Bajaj Finance will RTGS/issue a cheque in favour of the respective employer on behalf of the employee, based on the eligibility amount and ESOP requirement.
  • The employee should inform the date of allotment of shares to Bajaj Finance.
  • The employer must then allot shares into the POA Demat account of the employee, where the POA is in favour of Bajaj Finance Limited.
  • Bajaj Finance will create a pledge on those shares once the shares are allotted in the POA Demat account.
How is interest calculated on my loan for ESOP?

Interest is calculated based on the tenure you opted for ESOP financing at the time of application. However, Bajaj Finance charges a minimum of 30 days of interest if the loan is repaid within 30 days.

Can I apply for ESOP multiple times?

Yes, you may apply for ESOP financing multiple times if your loan account is active with Bajaj Finance Limited.

How can I get ESOP financing?

If you are planning to buy ESOP of any of the approved list of companies, Bajaj Finance can help finance your purchase. You can get a loan amount ranging from Rs. 1 Lakh to Rs. 175 crore at an interest rate of up to 20% p.a.

Is ESOP funding available for all companies?

No. ESOP Funding is available for the companies listed stock exchanges and subject to approval from credit team of Bajaj Finance. Check the list of companies eligible for ESOP funding.

What security / collateral is required for ESOP financing?

No additional security / collateral is needed to be provided, apart from the shares against which the ESOP funding is granted.

What benefit does the Employees Stock Ownership Plan (ESOP) offer?

An ESOP's benefit is that it enables staff members to purchase shares or ownership in the business they support. You get stock in the business after joining as an employee.

What is the eligibility criteria to apply for ESOP financing?

The eligibility criteria for ESOP financing with Bajaj Finance are:
• Nationality: Indian
• Employment: Salaried or consultants with the company
• Age: 18 years to 70 years

How to apply for ESOP financing?

To apply for ESOP financing, click on the ‘Apply’ button on the page. You will be redirected to our form, where you will have to fill your personal details and the value of your shares.
Once all your details have been verified through an OTP, sent on your phone, our representative will contact you for further processing of your application.

What documents are required to apply for ESOP financing?

The documents required to apply for ESOP financing with Bajaj Finance are:
• Valid address proof
• Live photograph
• Bank proof
• Signature image on white page

Which companies offer ESOP?

Multiple companies offer ESOP facility to incentivize and retain their employees, especially key employees who are crucial to the success of the business. ESOPs provide employees with the opportunity to buy company stock at a discounted price or to receive stock as part of their compensation package.
For ESOP financing Bajaj has identified a list of companies. All employees of the company eligible for ESOP can get loan to buy the ESOP.
Click here to see the list of companies.

How does ESOP financing work?

ESOP financing involves the use of Employee Stock Ownership Plans (ESOPs) to acquire shares in a company, which can be used as a form of financing. Here's how it typically works:
1. The company sets up an ESOP trust: The company establishes a trust and contributes cash, shares of its stock, or both to the trust.
2. The ESOP trust buys shares: The ESOP trust uses the cash or stock contributions to purchase shares of the company's stock.
3. ESOP trust distributes shares to employees: The ESOP trust distributes the purchased shares to employees who participate in the plan, either as a direct purchase or as part of their compensation package.
4. Employees hold or sell shares: Employees can either hold onto the shares or sell them, depending on the terms of the plan.
5. Company contributions and tax benefits: The company can make additional contributions to the ESOP trust to fund future purchases of company stock, which can be tax-deductible. Additionally, the company can deduct contributions to the ESOP trust from its taxable income.
6. ESOP loan repayment: If the ESOP trust uses borrowed funds to purchase shares, the company will make contributions to the trust to repay the loan, which can also be tax-deductible.
Overall, ESOP financing allows companies to raise capital without incurring debt, while also providing a way for employees to participate in the company's success. Additionally, the tax benefits associated with ESOPs can make them an attractive financing option for companies.

How do you finance an ESOP?

An Employee Stock Ownership Plan (ESOP) is a type of employee benefit plan that allows employees to become owners of a portion of the company's stock. There are several ways to finance an ESOP, including:
1. Leveraged ESOP: This is the most common way to finance an ESOP. In a leveraged ESOP, the company borrows money from a bank or other lender to buy shares of the company's stock. The ESOP then holds the shares on behalf of the employees. The company makes contributions to the ESOP each year, which are used to pay back the loan.
2. Non-Leveraged ESOP: In a non-leveraged ESOP, the company contributes cash or shares of its stock directly to the ESOP. The ESOP then allocates the shares to the employees based on a predetermined formula.
3. Combination ESOP: A combination ESOP is a mix of both leveraged and non-leveraged ESOPs. In this type of plan, the company contributes cash or stock directly to the ESOP, and the ESOP also borrows money to buy additional shares.
4. Seller-financed ESOP: In this type of plan, the company's owner or owners sell some or all of their shares to the ESOP. The ESOP borrows money to buy the shares from the owner, and the owner provides financing to the ESOP.
5. Hybrid ESOP: In a hybrid ESOP, the company contributes both cash and stock to the ESOP. The ESOP uses the cash to buy additional shares, and the stock is allocated to the employees based on a predetermined formula.
It's important to note that financing an ESOP can be a complex process that involves legal, tax, and financial considerations. It's recommended that companies seeking to establish an ESOP work with experienced professionals, such as lawyers, accountants, and financial advisors, to ensure the plan is structured correctly and complies with all relevant laws and regulations.

What is the interest and fees on ESOP financing?

Bajaj Finance offers interest rate of up to 20% p.a. for ESOP financing. Other fees and charges applicable include processing fees, legal charges, stamp duty (if applicable) etc.

Is there an origination fee or processing fee charged when applying for a loan against shares?

Yes, Bajaj Finance charges a processing fee of up to 4.72% of the loan amount (inclusive of applicable taxes).

What are the fees and charges associated with ESOP financing?

The fees and charges associated with ESOP financing are mentioned above. It's important to carefully consider the interest rate and any fees associated with a loan before accepting it to understand the full cost of borrowing and ensure that the terms are reasonable and affordable.

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