Flexi business 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 business loan?
Flexi business loan is a facility where the borrowing company is approved for a loan limit, for a pre-decided tenor. 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 business loans: pay interest only on the used loan amount
The interest is applied on the utilised loan amount for Flexi business loans. 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 business loans lower.
Illustration: Suppose 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 case of a business term loan, the interest would have been applicable to the whole of Rs. 20 lakh. The interest for a tenor of 4 years would be Rs. 12,80,000.
Additional read: 4 types of business loans explained
Flexi business loans’ EMIs can comprise only the interest component, not the principal
Unlike the business 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 tenor. This feature further lowers your EMI amount.
In the business term loan, the EMI includes both the interest and principal component.
| Term Loan | Flexi Business Loan (subject to full utilization) | |
|---|---|---|
| Loan amount (Rs.) | 10,00,000 | 10,00,000 |
| Interest rate | 16% | 16% |
| Tenor | 48 months | 48 months |
| Monthly cash flow / EMIs (Rs.) | 28,340 |
13,333 |
This table highlights the wide difference between the EMIs of the business Flexi loan and the business term loan.
Flexi business loans result in lower EMIs, because
- The interest is charged only on the utilized loan amount
- The principal may not be a component of EMIs
Other benefits of Flexi business loans
Flexi business 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 1 day.
Existing customers of Bajaj Finserv 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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