While availing of business finance, you often take into account the interest rates and applicable GST charges. However, lenders often levy additional, hidden charges. Not considering these charges can disturb your loan repayment planning.
So, before you apply for business finance, know about the following hidden business loan charges.
1. Loan processing fees
This is the most basic fee charged by lenders. Loan processing fees are charged for processing your loan application and is, therefore, levied when you submit your application along with the required documents. It is a one-time fee and will not be refunded if you cancel your loan application later.
2. Documentation charges
These charges are distinct from the loan processing fees. After the lender has sanctioned your business loan, they will run a thorough vetting of your various documents to ensure they are credible. They may even appoint an advocate to undertake this task. Documentation charges cover costs associated with this process and will be charged after loan sanctioning but before disbursal.
Additional Read – Must Follow Rules before applying for a business loan in 2021
3. Inspection charges
Normally, the lender would want to inspect your business property or factory premises to establish its legal standing. This inspection can be a time-consuming process requiring a group of inspection officers. The lender will cover the costs associated with the inspection through inspection charges.
4. Foreclosure charges
This is another important charge levied besides business loan interest rates and GST. Your loan agreement specifies the tenure within which you need to repay the loan. If down the line, you find yourself with sufficient funds to make a single bullet payment and close the loan, your lender will charge a penalty in the form of foreclosure charges, which may be a certain percentage of the outstanding amount.
These charges may be waived if you pay from the internal accruals of your business.
5. Penal interest and charges
Penal interest refers to an additional rate of interest levied by the lender if you fail to make timely monthly instalments. Penal interest may also be levied if you breach the conditions mentioned in the loan agreement. Since this is a hefty fine, it is recommended that you avoid defaulting on your EMI payments.
For this, you can start by using the simple business loan EMI calculator tool that will help you know the exact EMI you need to pay each month. Then, set up auto payment with your bank to pay your monthly EMI on a fixed date each month.
Additional Read – What are Foreclosure Charges on Business Loan?
So you see, that was a list of charges you will be levied by your lender when you apply for business finance. Consider these expenses and calculate the total cost of your loan before applying. When looking for a competitive loan offer, Tata Capital is your single stop. Apply for a loan of up to Rs. 75 lakhs with extended tenures worth six years. Enjoy a smooth repayment journey via flexi EMI options.
To know more about business loan eligibility and documentation visit our website.