2 min read
25 May 2021

Flexi Loans are an ideal way to finance your business needs: short-term and long-term. You can avail them for equipment and/ or working capital financing, expansion of premises, and others.

What is a Flexi Loan?

Flexi Loan is a facility where the borrowing company is approved for a loan limit, for a pre-decided tenure. You can withdraw as you need, without utilising the whole amount. The interest is applicable only on the utilised loan amount. This is a unique feature that sets it apart from the traditional business Term Loans.

Flexi Loan: pay interest only on the used loan amount

The interest is applied on the utilised loan amount for the Flexi Loan. In a business Term Loan, the interest is applicable on the whole loan amount, irrespective of the amount utilised. This is one aspect that makes the EMIs of Flexi Loan lower.

Illustration: Suppose that a flexi business loan amount is taken for Rs. 25 lakh at a yearly rate of 16% and only Rs. 10 lakh is utilised. The interest will be applicable only on Rs. 10 lakh. If the loan is for 4 years, then the total interest amounts to Rs. 6,40,000.

In the case of a business Term Loan, the interest would have been applicable to the whole of Rs. 20 lakh. The interest for a tenure of 4 years would be Rs. 12,80,000.

Additional read: 4 types of business loans explained

Flexi Loan EMIs can comprise only the interest component, not the principal

Unlike the Term Loan, the EMIs of Bajaj Finserv flexible Business Loan include only the interest component. The principal can be repaid at the end of the loan tenure. This feature further lowers your EMI amount.
In the business Term Loan, the EMI includes both the interest and principal component.

  Term Loan Flexi Loan (subject to full utilisation)
Loan amount (Rs.) 10,00,000 10,00,000
Interest rate 16% 16%
48 months 48 months
Monthly cash flow / EMIs (Rs.) 28,340

This table highlights the wide difference between the EMIs of the business Flexi Loan and the business Term Loan.
Flexi Loans result in lower EMIs, because

  • The interest is charged only on the utilised loan amount.
  • The principal may not be a component of EMIs.

Other benefits of Flexi Loans

Flexi Loans are unsecured loans, which require no collateral. This obviates the need for asset valuation for pledging of the collateral. Reduced documentation accelerates the approval process to one day.

Existing customers of Bajaj Finance may get exclusive pre-approved offers such as a top-up loan or reduction of rates. Flexi Loans are offered to businesses with a minimum vintage of 3 years.

You can borrow as you need and repay when you can. You can borrow from the loan limit several times as long as you do not exhaust the loan limit.

Additional read: Best business ideas in India

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