From handling short-term credit crunch to hiring staff for seasonal needs, you need additional funding at different stages of your business. Funds are the lifeline of your business. Though the loan amount is crucial, the type of loan - flexi or term - is an important factor to consider.
While term loans have been the traditional method of funding, Flexi Business Loans are a new concept in the market. Both these loans differ on various aspects that you should know as they can affect operations and your repayment strategy.
Let's find out the differences between both these types of loans and various other practical details.
1. Loan amount
While Flexi Business Loans offer a flexible loan limit, term loans offer a lump-sum amount. The loan limit is directly proportional to your credit score. The higher the credit score, the higher the loan limit.
On the other hand, the lump sum offered for term loans doesn’t entirely depend on the credit score. Reputation in the market, cash flow, collateral offered, and business viability are some other factors influencing the loan amount and the borrowing exercise.
2. Rate of interest
One of the major differences between Flexi Business Loans and term loans is the rate of interest. In the case of a Flexi Business Loan, interest is on the amount utilised and not on the entire loan limit. However, interest for term loans is on the entire principal amount irrespective of the amount utilised.
3. Structure of EMIs
In case of a Flexi Business Loan, your EMIs will depend only on the usage of funds and you pay interest only on the borrowed amount as your EMI. Additionally, you can choose to pay only interest as your EMIs. This can reduce your EMI amount by almost half. However, in case of a term loan, the EMIs consist of principal and interest component.
For a term loan of Rs. 1 lakh at 15% interest, your EMI is Rs. 2,489. However, in case of flexi loan for Rs. 1 lakh at 15% interest, the EMI could be just Rs. 1292. That's almost 50% less each month.
Our Flexi Business Loans let you pay only interest as your EMIs and repay the principal at the end of the tenor. Thus, you make significant savings on your EMIs, which you can use to boost your business’s everyday working capital needs.
4. Fund disbursal
Access to funds in these loans is much quicker than in term loans. The amount of paperwork and scrutiny involved in term loans take up a significant time, comparatively. At Bajaj Finserv, once we approve your loan and loan limit, you can withdraw funds from your loan account and transfer them to your bank account in just 2 hours.
Additional Read : Flexi Business Loans Explained
Flexi Business Loans, as the name suggests, provide flexible options to business owners to utilise their funds as and when required. For small and medium sized businesses, a Flexi Business Loan is the best bet as it allows them to get funding more quickly for urgent financial needs.
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