Now it’s possible to get a Business loan purely based on the transactions you do on your E.D.C or swiping machine. This is an amazing product for those businesses who generally do not qualify for a normal business loan as this is a totally different product by design and lenders are quite comfortable lending since there is a higher probability of recovering the loan amount.
How do you qualify for this product?
- You need to be a card-accepting business with a minimum vintage of one year. Certain lenders will consider your online receivables as well.
- Since you have an online business or a physical store which accepts payment via card mode, you already possess certain documents which the bank or lender requires like company registration, G.S.T Certificate, etc.
- Few lenders insist on the monthly card/online payment transactions of at least 1,00,000 & above per month in your account. However, most of them would look at 3,00,000 & above transactions.
- You need to have a decent Credit history/CIBIL rating. However, under this product, lenders are more liberal compared to a normal business loan.
How does this product work?
- Once you qualify for this loan product & loan is approved you will be required to put in an EDC machine as specified by the lender.
- Most of the times repayment is done on daily or weekly basis. Based on your eligibility & credit profile, you could get fortnightly or monthly repayment facility
- The daily/weekly/fortnightly/monthly emi will be deducted at source through the merchant banker & balance amount will be settled to your current account.
- The rate of interest is pretty high under this product. On average you will be levied a flat monthly interest of 2%
- Tenure is usually limited to 6 or 12 months
Since repayments are on daily/weekly/fortnightly mode, lenders receive payments much faster. Also, tenure is limited to shorter period which reduces the risk to large extent to the lender.
Moreover, banks & other lenders have started lending to segments that normally was considered a negative or Risky profile through this product. This includes petrol pumps, bars & restaurants, garment shops, etc. More customers have joined the loan bandwagon.
Have a business accepting cards or online payments and looking for advice? Get in touch with us