Types of Loans Offered by Indian Banks to Transport Businesses
Everything you need to know about loans for businesses in the transport sector.
Indian banks offer a wide range of lending schemes to their retail and business customers. The loans for each type of audience are divided into different categories so that the varied needs of these customers are met. For businesses, the lending schemes vary depending on the size of business, type of financial needs, types of products / services offered, etc.
Let us take a look at them one by one.
Based on the Size of Business
Indian banks divide their business lenders into two main categories depending on the size of the business, namely:
- Corporate Business loans: These loans are designed to meet the financial needs of larger businesses that have established their name in the industry. So, a trucking company, a logistics operator or a packers & movers business that has a sizeable business or has been in operation for some time be able to access these loans
- MSME loans: Small business loans, as these loans are often called, are meant for new and existing businesses that fit the MSME definition. MSME stands for Micro, Small and Medium Enterprises. The banks may also offer special schemes for business in the Micro and Small Enterprises (SE) sector. These schemes are for transport businesses that are smaller in size then corporate loans. Banks usually fix the size of the business based on their turnover, fleet size and so on
Based on the Financial Needs
Some business loans offered by Indian banks depend on the type of assistance required by the business. These include:
- Working Capital Loans: These loans help transport businesses meet their short-term financial needs (working capital) such as investment in current assets, purchase of inventory, payment of salary, etc.
- Term Loans: Usually called as term loans, as they are for a specific term (time period), these lending schemes offer financial assistance to meet the larger capital expenditure needs of a transport business. These may include buying property. Building a packaging or storage facility, or purchasing long-term assets for the business such as cranes, forklifts, generators, etc.
Indian banks also offer non-funded assistance to transport businesses such as Letter of Credit, Bank Guarantee, etc.
Based on the Products / Services Offered by the Business
Some business loan schemes offered by Indian banks are specific to the industry to which the business belongs. Special business loans are only offered to transport businesses may include:
- Loans to Purchase New Vehicles: These loan schemes are designed to help transport businesses purchase brand new vehicles. Some banks may even offer a scheme in which the business can reimburse the payment of vehicle purchase within 3 months of completing the transaction
- Loans to Purchase Pre-owned Vehicles: As the name suggests,m these loan schemes are designed to help transport businesses purchase second-hand vehicles. The bank may have terms that specify how old the vehicle can be to be financed by the loan
- Loans Against Vehicles: If a transport business needs to raise funds to meet other needs including the expansion of business, debt repayment, etc. then they can do so by availing a loan against one or more vehicles owned by the business
In addition to these broad categories, Indian banks may also offer separate loan schemes to new and existing transportation businesses. These may be offered on a case to case basis. This is simply because sanctioning loans to new businesses is a bigger investment risk for them than existing businesses.
A Final Word
Now that you know about different types of loans for transport businesses, you might want to know more about specific business loan schemes offered by Indian banks. Please check our Business Loans page for details where we have discussed loans offered by different Indian banks.
Disclaimer: This article is for informational purposes only. All details provided here are correct as on the publishing date of this post. Please check with the bank and other official sources before taking any investment or related decisions.