A business loan agreement is a legal document that protects both the financial institution and the borrower’s interest. Both parties to sign this agreement before the sanctioned loan amount is transferred into the borrower’s account. A business loan agreement consists of various essential provisions and conditions that individuals must review and comprehend before signing this document.
Nevertheless, before delving into the clauses in a business loan agreement, one must know the meaning of an enterprise loan and how to calculate the monthly EMIs using a business loan calculator.
What is a business loan agreement?
A business loan is a form of financial assistance that an entrepreneur avails from a financial institution to meet various requirements of the business. One can opt for such a form of financial assistance to introduce a product line, expand operations or fulfill working capital needs.
Without an adequate amount of working capital, an organization will fail to ensure the smooth flow of day-to-day operations. Hence, it’s imperative to learn how to ensure that your business never runs out of working capital.
Nevertheless, if business owners are not sure how much EMI he/she needs to pay on an enterprise loan, using a business loan calculator can be an effective solution. Navigate to a financial institution’s website and input the loan amount, interest rate and tenure; subsequently, the monthly EMI will be displayed.
After knowing how much monthly EMI is to be paid, individuals must sign the business loan agreement to initiate the loan disbursal process.
Nevertheless, it is imperative to scrutinise these elements before signing the document:
- Annual Percentage Rate (APR)
APR refers to the cost an individual has to incur per year to borrow funds. It includes the interest rate and fees imposed by a financial institution. Even a slight difference in a business loan APR can increase your monthly expenses. Hence, make sure that it is accurate.
- Default clause
Default refers to the inability to repay the loan amount. Nevertheless, the loan default policies may vary from one financial institution to another. Therefore, it is imperative that business owners have a clear understanding of the financial institution’s guidelines in relation to loan default.
- Penalty charges
A financial institution levies penalty charges on top of EMIs in case a borrower does not pay the monthly instalment on time. The amount of the penalty imposed varies from one lender to another. Situations may arise when an entrepreneur is not able to pay the monthly EMI. It’s crucial to know the exact amount of penalty that needs to be paid to manage the funds better during such circumstances. Nevertheless, it’s essential to know how to organise your business finances so that you can avoid paying such additional charges.
Moreover, individuals can look for business loans from reputed financial institutions, such as Bajaj Finserv, to avail of additional benefits. For instance, this company provides immense tenor flexibility, allowing borrowers to repay an existing amount through a maximum of 84 instalments.
The NBFC also engages in the provision of attractive pre-approved offers to simplify the online application process. These offers are available on various financial products, such as business loans and credit cards. Check your pre-approved offer now by entering some basic information.
- Prepayment charges
Most of the financial institutions impose a certain amount of penalty if business owners repay their loans before the time period mentioned in the business loan agreement. Hence, it’s vital to know beforehand whether a loan provider levies any prepayment charges to avoid paying additional charges.
Once an individual calculates the EMI amount using a business loan calculator, he/she must make sure that the amount matches with the figure in the business loan agreement. Entrepreneurs must also review all key elements mentioned above to avoid any discrepancy in future.