business term loan report

8/9/2019 Business Term Loan Report

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A PROJECT REPORT ON BUSINESS TERM LOAN

MASTER OF BUSINESS ADMIMISTRATION

Program of STEVENS BUSINESS SCHOOL

GANDHINAGAR

Submitted by: Submitted to:

Nirav Patel Dr. Himani JoshiBhupendra Zala Academic Coordinator,Hiren Darji Stevens Business SchoolPunit LaheruKeyur SavaliaMitesh Shah

D AT E O F S U B M I S S I O N : 2 5 T H F E B R U A R Y 2 0 1 0


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Business Term Loan Page 2

It is indeed an opportunity to prepare a report on Business Term loan and consumer behavior

towards Business Term Loan. Preparation of such type of report calls for intellectualnourishment, professional help and encouragement from many areas.

We would like to thank Stevens Business School for the compulsion of this most wonderfulaspect of our MBA curriculum without which knowledge of management studies is incompleteand futile.

We would like to thank and express our gratitude to Dr. Himani Joshi for providing us herguidance and co- operation.

Further, we are thankful to all the respondents of our questionnaire who spared there timefrom their busy schedule and obliged us by giving their co-operation and the information weneeded

Lastly, we would like to thank to all those who had helped us directly or indirectly in completing

this project successfully.

Thank you

Acknowledgement


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In the growing global competition, the productivity of any business concern depends upon thebehavioral aspect of consumers. This topic deals with the customers perception towardsBusiness term loan from private and public bank. The report begins with the introduction tobusiness loans including different types of business loans, interest rate, and procedure forloans, documentation and other necessity for business loan.

The second section is the introduction to State Bank of India (SBI) and ICICI. It include businessloans details which is provided by these banks including interest rates, documents which arerequired for loan and other loan related information.

The third section include methodology adopted in preparing this report is mentioned. It coversthe sample procedure, types of data used and the data collection method.

The fourth section comprehensive coverage of forecasting concepts and techniques whichshows the analysis of data through tabulation, computation and graphical representation of data collected from survey.

The fifth section deals with the findings , suggestion & conclusion part which is very muchimportant after analysis is made.

As we know that only analysis and conclusion is not the end of a research, so in the sixth partthe recommendation part is covered which are made after a depth study of the analysis part of thesis.

In each of the sections as described above, every section has been scheduled in a manner so asto enable the reader to appreciate the contents easily. The report is supported by figures anddata wherever necessary with a view to assist the reader in developing a clear cutunderstanding of the topic.

We hope this report will be extremely useful for those it is meant. Constructive and healthysuggestions for improvements of the report will be great fully appreciated.

Abstract


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Sl. No. Particular Page No.

1 Acknowledgement 02

2 Abstract 03

3Chapter

1Business Loan 05

1.1 Business Loans 05

1.2 Business Loan Mortgage 05

1.3 Business Loan Interest Rates 09

1.4 Foundation for Business Loan Approval 10

1.5 List of Banks in India 11

1.6 Types of Business Loans 12

1.7 Common Business Loans 12

4Chapter

2Business loans from SBI 15

2.1 Traders Easy Loan Scheme 15

2.2 Retail Trade 15

2.3 Security 16

2.4 Eligibility 16

2.5 Purpose 16

2.6 Nature of facility 16

Table of Content


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2.7 Margin 16

2.8 Tenure of Loan 16

2.9Primary security

16

2.10 Collateral security 17

2.11 Loan amount 17

4Chapter

3Business loans from ICICI (Industrial Credit and InvestmentCorporation of India)

18

3.1 Overdraft 18

3.2 Documents required 19

3.3 Business loan for working capital 19

3.4 ICICI Bank Advantages 19

3.5 Loan backed by credit guarantee from CGTMSE 20

3.6 Key Features 20

3.7 Available in two attractive variants 20

3.8 Eligibility 20

3.9 Pricing 21

3.10 Description of Charges 21

3.11 Business with ICICI Business Loan 21

3.12Process to get a Business Loan to Improve Your ExistingBusiness (ICICI)

22

3.13 Online Business Loan 22

3.14 Securing individual Business Loan 23


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3.15 Flexible Repayment Options 24

3.16 ICICI Business Installment loan 24

5Chapter

4 Research Objective 25

6Chapter

5Data analysis and interpretation 26

5.1 Most preferred Bank for Transaction 26

5.2 Types of loans taken by people 28

5.3 Most preferred Bank for Business loan 30

5.4 Criteria for Business loan by Consumers 32

5.5 Most liked features of business loan 34

5.6 Reason for taking business loan 36

5.7 Annual turn over of company who have taken loan 38

5.8 Types of the business the loan taker have 40

5.9 Line of Business who has taken a loan 41

5.10 Future planning to take business loan 42

7Chapter

644

6.1 Conclusion 44

6.2 Recommendation 45

8 Appendix 46

9 Reference 49


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1.1) Business Loans

Business loan make cash available to the businessman who is used to start a newbusiness or grow and enhance the existing ones. Business loans are provided through avariety of programs and lenders.

The businessman who wants to start up a small business face difficulties in obtaining thesmall business loan since it requires stringent documentation. Business loan is used for avariety of purposes.

It can be used to meet the start up costs, expansion of the business and for capitalinvestments. Banks provide business loans to its customers. But they have strict normpertaining to their lending decisions.

Apart from the banks there are other lenders and angel investors who offer smallbusiness start up loans. There are also venture capitalists who want to tap the differentinvestment opportunities.

Grants and government loans also assist the business owners in getting business loans.There are different types of business loans. They are small business specific programs,industry specific loans, micro loans, community development loans.

A number of things are required to obtain the business loan. It includes a completebusiness plan, personal and business financial statements, collateral to secure the loan,incorporation documents, and proof of ownership or sale if the business was purchased,tax returns and credit references, material contracts etc.

One may browse through the following links to have more detailed informationabout Business Loan.

1.2) Business Loan Mortgage

Business loan mortgage is an important issue especially for the businessmen who are inthe process of securing a business loan. Any business small or large requires enoughcapital investment. For this required funding they have to depend on loans.

It has been observed that most of the business loans are actually business mortgageloans. The other name of business mortgage loan is commercial mortgage loan. Thesecommercial mortgage loans or business mortgage loans are very different fromthe residential mortgage loans.

In case of Business loan mortgage, rates and terms of payments are negotiated betweenlender and borrower. These loans have commitment fees associated with it. So, in manyways a business mortgage loan is a kind of customized financing.

Chapter 1: Business Loan


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A business loan mortgage is a loan taken by a business using a commercial building orother business real estate as collateral. In case of business mortgage loan, borrower isno individual but a business. This business can be a sole proprietorship, partnership or alimited liability company.

So, proper estimation of the creditworthiness of the business enterprise is a seriousfactor in this case. It is crucial because in case of default in repayment of loan by theborrower, the lender can only take hold of the collateral but cannot establish anyfurther claim even if he suffers from loss of capital.

Terms of business mortgage loan The term of a business mortgage loan can vary from 5years to 30 years. Though, generally business organizations choose to repay the loan in20 to 30 years. Till the full repayment of the loan, that is for term period of the loan, theproperty used as collateral, remain amortized.

Use of business loan mortgage Business loan mortgages are generally used to acquire

land or any commercial property to start a business. These loans are also taken toexpand an existing business. Another use is to refinance a credit taken earlier.

Basics of business loan mortgage Business mortgage loans, which are generally longterm, require monthly payments for the whole term period. These periodic paymentsare calculated in accordance with time value of money.

Over the total term period of the loan, the principal part and interest part of loan arepaid off. The banks or financial institutions that are the lenders, offer this kind of loansto earn interest income. A business loan mortgage can be transferred from a financialinstitution to another one.

In that case a settlement is done among the earlier lender, present lender and theborrower. After that the present lender pays the dues to the earlier one and becomesentitled to receive the monthly payments from the lender.

Types of business loan mortgage Payment amount and payment frequency can differ forthe business mortgage loans. For some business mortgage loans, amount to be paid perperiod may change according to borrowers wish that is, borrowers can get the option of paying variable amount at different periods.

For some business mortgage loans, prepayment has no restriction but for some thereare limits on prepayment either on full amount of loan or on a certain amount of loan.

Payment of penalty to the lender can also be associated with prepayment of somebusiness mortgage loans.

Interest Rates associated with business mortgage loans Interest rates associated withbusiness mortgage loans generally higher than the interest rates of residentialmortgage loans.


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In most of the times, business mortgage loans come with fixed interest rates that is, theinterest rate remains fixed for the whole term period of the loan. But business mortgageloans also can have variable interest rates associated with it.

Underwriting Standards Business mortgage loans are always underwritten on the basis

of the attributes of the amortized property, not on the basis of credit attributes of borrower.

For this reason, ownership of the property being mortgaged requires to free from anylegal hassle. Business mortgage loans can be seen in every economy whether developedor underdeveloped but its terms, procedures and types varies from country to country,

usage remaining the same.

1.3) Business Loan Interest Rates

Business loans are something no business can do without. To set up a business or to

expand a running business or to launch a new product, business loans are of utmostimportance.

Here is providing you information on Business Loan Interest Rates. Businesses that usecredits to finance their business expenditure generally do well and earn good profits.Business loans help in achieving effective budget management.

Business loans can be availed through various sources. Banks and other financialinstitutions provide business loan. Various government programs are also there to giveeconomic support to start-up businesses.

If a new business manages to get a significant amount of business loan from a bank, it

can easily establish its presence in the market. Credit financing from a renownedinstitution gives the business, good business reputation.

So, credit financing is always encouraged rather than compromising on the financialneed of the business and starting it with very low investment in an unprofessionalmanner.

Business Loan Interests are certainly the figures about which the borrowers need to beconcerned the most. To repay a business loan, a borrower has to interest along with theprincipal amount.

These interest payments compensate the lenders for the rising prices and serve like a

reward for temporarily giving up their ability to spend. The business men also agree topay interests on their business loans because using loans they can buy equipments andinventories which will in turn generate higher amount of profits.

Interest rates associated with business loan vary in most of the cases. The factors whichmainly lead to this variation are different degrees of risk involved with the loan,
http://www.economywatch.com/business/business-loan-interest-rate.htmlhttp://www.economywatch.com/business/business-loan-interest-rate.html


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different durations of the loan, Tax Considerations of the loan and diversecharacteristics of the loan.

If a business loan involves higher risk, interest rate will be higher and if the loan is lowrisk, interest rate will be comparatively lower. If the business loan is business mortgage

loan then it has lesser risk associated with it as in business mortgage loans there isalways Collateral.

Collateral is a property of the borrower which can be seized by the lender if theborrower fails to repay the loan. The longer is the term of repaying the loan; interestrates tend to be higher.

In longer period inflation might accelerate resulting in reducing the purchasing power of the repayment of the loan. So, interest rates of long term loan are generally than that of the short term loans. Interest payments on some business loan have tax advantages.

Interests on Business loans taken from the govt. have the benefit of tax exemption up to

a certain limit. So, the business loans from govt. come with lower interest rates. As far as the business loan interest rates are concerned, they vary generously as wehave earlier said. However, we can get an idea about the business loan interest rates.Loans taken for Business Purchase, with a term 6 to 84 months, have interest ratesvariable from 8.25% to 10.25%.

Interest rates on loans, taken for Business Refinance with 6 to 84 months term period;vary from 8.25% to 10.25%. Business Loans taken for the purpose of purchasingequipments and furniture for the business, generally having 12 to 60 months loan termperiod comes up with interest rates varying from 8.25% to10.25%.

1.4) Foundation for Business Loan Approval

Business loans seem like a great idea, especially when you are planning the launch of your own small business. Business loans can provide much needed funds for supplies,equipment and other start up costs related to beginning a new business.

Before you head to the bank or other financial institution to secure a loan for your newbusiness, make sure you know a few simple basics.

Have a good business model and plan. Dont go to your financial institution with ageneral idea of what you want to do with the money, have it written out clearly. Notonly should you include what your business will do, also include projections for theupcoming year, as well as where the money you borrow will be allocated.

You may also want to include examples of businesses like yours that did well. This leavesyour financial institution feeling secure about their position in supporting your business.

You should also know your budget. It can be easy to go to a bank and say that you wantx amount. But remember that the business world can be volatile, and youll need topay the money back regardless of how your business is doing.
http://www.economywatch.com/business/business-loan-interest-rate.htmlhttp://www.economywatch.com/business/business-loan-interest-rate.html


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Remember to keep yourself on a tight budget until your business does start makingmoney, or youll regret it when its time to repay the loan.

1.5) List of Banks in India

1.5.1) Nationalized Banks

Allahabad Bank Andhra Bank Bank of Baroda Bharat Overseas Bank Ltd. Canara Bank Indian Bank Development Credit Bank

Indian Overseas Bank Jammu & Kashmir Bank Ltd. Karnataka Bank Ltd. Oriental Bank of Commerce

Punjab and Sind Bank State Bank of India State Bank of Mysore State Bank of Saurashtra Syndicate Bank Union Bank of India Corporation Bank

Dena Bank UCO Bank Vijaya Bank Kerala Banking

1.5.2) Private Banks

Centurian Bank of Punjab Corporation Bank Dena Bank Export-Import Bank of India HDFC Bank ICICI Bank IDBI Bank

ING Vysya Bank Kotak Mahindra Bank Punjab and Maharashtra Bank Ltd. Saraswat Co-operative Bank Ltd. Times Bank UTI Bank Yes Bank

1.5.3) Foreign Banks

ABN AMRO Bank Abu Dhabi Commercial Bank American Express Bank ANZ BNP Paribas Citibank India DBS Bank HSBC Standard Chartered Bank


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1.6) Types of Business Loans

Business loans, as the term indicates, refer to the loans acquired for establishing,running or enhancing one's business. The dictionary meaning is simply, bank loangranted for the use of business.

There are various types of loans which come under the umbrella of business loans.These loans have to be carefully planned and thus, those who want to apply for businessloans should formulate a clear business plan.

A business loan relates to the expansion, start up or enhancement of a business. It alsoimplies the periodical redistribution of financial assets between the borrower and thelender. The process of acquiring business loans can be very tedious. It can also havesome tricky conditions and limitations.

To avoid that, all those who wish to apply for a loan, must have a concrete businessplan. Getting a business loan is difficult. But, if one follows the three C's of credit, then itwould be a smooth process. The three C's are Character, Credit and Collateral.

Character pertains to your integrity and your credit worthiness as a person. The bankerusually checks whether you have a criminal record. The banker may also scrutinize youraccountability to the community through your family ties, home ownership andduration of residing at a particular place.

The banker also checks the applicant's credit history. The banker can excuse a late creditcard payment. But, if the applicant is under heavy debt or mortgage and has skipped thepayments, it can create problems.

The last, but not the least is Collateral. The bankers favor good credit as well as cleancharacter. However, the factor that creates better chances of getting through the loanprocedure is the property owned by the applicant. That means it could be anything from

trucks to machines to buildings or any other equipment. Basically, the collateral is the solid property or instrumentation which could get a goodprice, even if the business fails. Collateral is a major point of consideration for thebankers. These days there are many who opt for business loans.

1.7) Common Business Loans

1.7.1) Secured Loans

In secured loans, the borrower promises his assets as collateral against the loan. Inreturn, the creditor grants the loan. The assets he or she pledges, then become a'secured loan' or 'secured debt'. In case of a default, the creditor gets the possession of the collateral.

As a result, the creditor can recover or regain the amount of the money loaned byselling the collateral.
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1.7.1.1) Types of Secured Loans

Mortgage Loans : Mortgage loans are taken against collateral, which is the applicant'sproperty, for instance, a house.

Non-recourse loan : It is a secured loan wherein the only security or claim the creditor

has against the borrower is the collateral. It is known as a non-recourse loan because,here, the creditor has no option or provision against the borrower other than thecollateral, in case of a failure in payment by the borrower. However, this is only after'foreclosure' by the borrower.

Foreclosure : This is where the mortgaged property is sold by the defaulting borrower torepay his debt to the creditor. This is an entirely legal procedure.

1.7.2) Unsecured Loans

Unsecured loans are the exact opposite of secured ones. It is a kind of a loan or debt,

which is not supported by collateral. It is difficult to get an unsecured loan; however, itis cheaper at the same time. Here, the credit rating of the business matters. It is basically an assessment of the

repayment capabilities of the business.

1.7.3) Start-up Loans

These are very basic loans, where the loan is applied for a new business venture.Meticulous planning is advisable, before applying for a start-up loan.

Here, the credit and collateral can have a deep impact.

1.7.4) Business Only Loans

These loans are availed only for business sans the usage of personal credit, till the timethe business is capable of returning the amount payable.

1.7.5) Business Acquisition Loans

If a company wants to go through a takeover process, or wants a loan to acquireanother business, there are loans to complete that procedure.

These are acquisitions financed through debt. Such acquisitions are called 'leveragedbuyouts'. This is very common, even if in many instances, the company has enoughfinances to carry out the takeover or the acquisition.

Apart from these, there are professional loans, where loans are applied by aprofessional from a specific field. For example, loans availed by doctors or lawyers andso on.
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On the whole, obtaining loans can be a very cumbersome and lengthy process. But withincreasing popularity, loans, be it a business loan, a home loan or a personal loan, arethe order of the day.
http://www.buzzle.com/articles/home-loans/http://www.buzzle.com/articles/personal-loans/http://www.buzzle.com/articles/personal-loans/http://www.buzzle.com/articles/home-loans/


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2.1) Traders Easy Loan Scheme

This scheme is launched by SBI to provide hassle free loan to Traders. Any businessman/ entrepreneur/ Professional and self employed person can avail this loan.

Loan under the scheme can be availed to meet normal business requirements and issanctioned against equitable mortgage of property.

Any residential or commercial property in the name of unit/ proprietor/partner OR theirclose relatives is acceptable. Agriculture property or property outside urban limits is notaccepted. The advance can be availed by way of Loan or Cash Credit limit.

It can also be availed for Non Fund Based requirements (for issuance of Bank guaranteesor LCs).

Cash Credit limit or non fund based limit is renewable every 12 months. Loan can berepaid in monthly or quarterly, even half yearly installments - as may be suitable to theborrower in a period up to 5 years.

Minimum and maximum amount of loan is Rs 25,000/- and Rs 5.00 Crores. Margin is35%. i.e. loan can be up to 65% of the realizable value of the property or the businessrequirement- whichever is less.

Business requirement is assessed on the basis of projected business turnover. Interest atfloating rate is charged at monthly intervals on daily reducing balance. No Third partyguarantee is required to avail the loan.

2.2) Retail Trade

The Bank finances Small Business activities that can be started with relatively lowerinvestment and with no special skills on the part of the entrepreneurs.

In this category, the SBI extends loans to retail traders who act as a vital link betweenthe manufacturers of goods or commodities and the consumer.

The bank offers working capital products as well as loans for purchase, renovation andrepairing of equipment.

Retail trade finance is normally capped at Rs 5 lakh. Any individual or a firm (partnershipor proprietorship) engaged primarily in buying and selling mercantile goods is eligible forthis mode of finance.

For requirements up to Rs 25,000, no margins are involved. For needs ranging from Rs25,000 to Rs 50,000, the margin is set at 20 per cent.

In other words, the quantum of the loan will be restricted to 80 per cent of the unit's

Chapter 2: Business loans from SBI


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expenditure. For fund needs above Rs 50,000, a 25 per cent margin may be applied.

2.3) Security

Primary Collateral

Loan up to Rs.25000/- Charge over the assetspurchased out of Banksfinance

Nil

Above Rs.25,000/- Charge over the assetspurchased out of Banksfinance

Charge Over theimmovable/movable assets/thirdparty guarantee as per RBIguidelines

2.4) Eligibility

Should have earned a pre-tax profits in each of the immediately preceding 3 years The trader should be well established and should have a proven record of profitability

2.5) Purpose

The loan can be considered for any general purposes like Holding of stocks/book debts Acquisition of land and building Building construction/up gradation and renovation of offices, showrooms, godowns etc Substitution of high cost debt Shoring of networking capital Computerization expenditure

2.6) Nature of facility

Term loan

2.7) Margin - 20%

2.8) Tenure of Loan

3 to 5 years. Repayment to be made in monthly, quarterly installments as per thenormal cash generation cycle.

2.9) Primary security

Hypothecation charge over the Current Assets and Fixed assets. Where finance is extended for acquisition of land and building, building construction, up


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gradation and renovation of offices, showrooms and god owns etc. equitable mortgageof relative fixed assets will be considered as the primary security.

2.10) Collateral security

Tangible security such as immovable property, bank deposits, NSC, RBI relief bonds etcto the extent of a minimum of 100% of the limits sanctioned personal guarantees of proprietor/partners/promoters to be invariably obtained.

2.11) Loan amount

Min Rs. 1 lakh Max Rs. 10 lakh


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At ICICI Bank, Smart Business Loan is easy access to money. Get up to Rs. 25 lacs as anOverdraft or a Business Installment Loan with no collaterals and faster turnaround time. JustFlashing existing Repayment Track Record, anyone can apply for an Overdraft Facility orBusiness Loan.

3.1) Overdraft

3.1.1) Easy Access Money

Working capital as Overdraft facility Validity of 12 months Interest to be levied on the amount utilized The flexibility to pay a minimum amount every month Interest Rate (IBAR + Cash Credit Premia - 2.7% ) Processing Fees of 2.5% Business Installment Loan

3.1.2) Seize growth opportunities

Credit facility in the form of Term Loan / Business Installment Loan Payment in the form of equated monthly installments Repayment tenure of 12-36 months Plan and control of cash flows Interest Rate (IBAR + Term Premia (0) + 3.5%) Processing Fees of 2.5%

3.1.3) Advantages

Faster loan sanctions with minimum documentation

One stop solution with a bouquet of products Attractive rate of interest Query resolution at local branches

3.1.4) Other benefits

Facility to deposit cash in the current account Online repayment facility

Chapter 3: Business loans from ICICI (Industrial Credit andInvestment Corporation of India)


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Availability of local Cheques Flexibility to open accounts at local branches

3.1.5) Eligibility

Income Tax Payee Good business track record Comfortable business vintage

3.2) Documents required

Latest sales tax/VAT/service tax return Latest income tax return Bank statement Certificate of registration

Proof of ownership: Title Deed, Municipal Tax/Municipal Charge Bill / Receipt, PropertyTax Paid Bill

Residence Proof: Telephone Bill/Electricity Bill Driving License/Valid Passport Identity proof: Driving License, Passport, Pan card

3.3) Business loan for working capital

Limits offered: Rs.10 lacks to Rs.10 Crores Business Loan Advantage Collaterals: Funding against commercial / industrial / residential property & liquid

securities. Collateral free funding against EDC machine card swipes for merchantestablishments.

Facilities offered: Cash Credit / Overdraft / Drop line Overdraft / Bank Guarantee /Letter of Credit / Export Credit / Cash Management Services. - Fast processing and quickavailability of loans with lesser documents.

Best suited for: Retailers / Traders / Manufacturers / Wholesalers / Distributors /Importers / Exporters / Dealers & Merchant establishments.

Pre-requisites: Minimum one year business vintage & audited financials.

3.4) ICICI Bank Advantages

Flexible Collateral norms based on your financials and property types from 30% to 200% Fast decisioning - decentralized operations, centralized decision making. Fast disbursement - subject to complete documentation, disbursement in 25 days Working capital limits to support your growth plans and enhancements based on your

further requirements ranging from 10 lacs to 10 crores. Exclusive relationship managers - who can provide you all financial services - including

trade accounts & services, remittances.


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E-mail, Mobile alerts. Internet banking convenience 8am to 8pm banking in select locations Interest rates on loans and advances are IBAR (ICICI Bank Benchmark Advance Rate)

linked. Present Interest rate is IBAR + 3% based on product offered.

3.5) Loan backed by credit guarantee from CGTMSE

Loan up to Rs. 25 lacs, specially designed to fund manufacturers under the CreditGuarantee Trust Fund for Micro and Small Enterprises (CGTMSE) scheme of SIDBI (SmallIndustries Development Bank of India) and Ministry of Small and Medium Enterprises.

3.6) Key Features

Loan amount of up to Rs. 25 lakh Funding for manufacturers under the CGTMSE scheme of SIDBI and Ministry of Small

and Medium Enterprises Charge on current assets No requirement of third-party guarantee No requirement of collateral security.

3.7) Available in two attractive variants

1)

Cash Credit Working capital as cash-credit facility (with charge on current assets) Facility for a period of 12 months Floating interest rate. Interest levied only on amount utilized. Flexibility of paying a minimum amount every month.

2) Business Installment Loan

Term loan with equated monthly installments (with charge on current assets / fixedassets financed through Business Installment Loan

Choice of fixed tenure for repayment (6 months to 48 months) Loan for purchase of assets / expansion / working capital Fixed rate of interest.

3.8) Eligibility

Track record of repayment of loans


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Audited financial statements of past two years Investment of less than Rs. 5 crores in plant and machinery Funding to proprietorships, partnerships, private limited companies and public limited

companies.

3.9) Pricing

Maximum PLR + 3% p.a.

3.10) Description of Charges

Loan Processing Charges / Origination Charges 2 % of loan amount + Origination Charges of 1.5% of loan amount Prepayment Charges 5% on the principal outstanding

Charges for late payment (loans) 2% per month Cheque Swap Charges Rs. 500/- Cheque bounce charges Rs. 200/-

Note

Origination Charges are included in the Advance installments/ First installment. Service Tax and other govt. taxes, levies, etc. applicable as per prevailing rate will be

charged over and above these charges

3.11) Business with ICICI Business Loan

When indivisible are in a business world, the only thing static is the constant change. Asis aptly said, the business world is all about dynamism. A businessman cannot afford tostay idle and relax thinking that his business is performing well and everything is undercontrol.

The moment this lethargy comes into the business minds, the die is cast for them andthey are bound to fall sooner or later. The only solution lies in incremental efficiencywhen you are in a business.

A businessman must think ahead of his competitors; out of box ideas can take yourbusiness on a higher altitude.

To keep any business updated with the latest trends and developments in the market, alot of research and development is needed.

With these requirements larger in an established business, it is important that financialexperts suggest you the concept of plugging back the profits.

This concept, if followed, can create a healthy reserve over a period of time that can beused for further diversification or expansion of the business.


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All businesses, however, cannot afford to plough back the profits for various reasons. If the business concerned is relatively new, it mealy becomes tough to keep profits inreserve and not distribute among the entitled persons.

A new business has to balance several equations when it comes to operational front. Abody corporate that is fundamentally strong can always reap the benefits of big reservesin difficult times.

Most entrepreneurs resort to business loans when funds for diversification of thebusiness are needed.

You have to be a good negotiator if you are aiming for low rate commercial loans foryour new business projects.

The loan market anywhere in the world adopts more or less the same principles when itcomes to lending money.

Your credit standing in the market, business goodwill and repaying capability are someof the factors that are taken into account by the lenders.

Low rate commercial loans allow businessmen an opportunity to diversify and grow a

phenomenon that starts with a strong will and enterprising attitude. For an establishedbusiness concern, expanding the line of business is easy.

The related products and services can be explored and worked upon. The expertise isalready there and you just have to put some more efforts to expand your businesshorizons.

The monetary requirements may come from the reserves and surpluses created in thenormal course of business or the business loans available in the market.

3.12) Process to get a Business Loan to Improve Your Existing Business (ICICI)

You may need to purchase new, updated equipment, do remodeling, add an addition,purchasing new fixtures for your business. Maybe you wish to start offering newservices that will require you to hire additional employees.

Perhaps you need to retrain your current staff to offer new services. The time has comefor you to take out a business loan to cover these expenses.

3.13) Online Business Loan

There are qualities, reputable lenders who do business exclusively online who are willingto invest in your business by loaning you money to help improve it.

These lenders have established websites to make the application process possible in aconvenient, hassle free environment. To apply for your business loan, you will visit thelenders website.

You will be able to fill out a secure online application on the lenders website that willask for general information about your business, including revenue generated, projectedsales, etc.


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3.14) Securing individual Business Loan

You will most likely be asked to secure your business loan with something of value, suchas your own home, real estate, business property, etc. If you were to forfeit on the loanfor any reason, the lender can foreclose upon the security just as they could with anyother type of loan.

That means that regardless of the success (or lack of) that your business experiences,you will still be responsible for repaying your business loan. Getting a business loan is animportant step, no matter how big or small a company is. Mega corporations needloans, as do the smallest individually run companies.

If a small business fails to obtain a loan, they could face serious trouble, including notbeing able to pay employees, buying supplies and equipment, or having to ceaseoperation completely. A business will need to be prepared in order to convince a bankor other financial institution to lend them money.

There are many things that can prevent them from getting a loan such as being seen as

too much of a risk and not having a good business plan. Being seen as too much of a riskis the biggest reason why a lender will turn down a business from getting a businessloan.

Banks will conduct a risk assessment, looking at many things to decide whether or not abusiness will be able to repay the money borrowed should the bank decide to lend it tothem.

A business will likely be given a loan if it is determined that they pose little risk of notbeing able to repay the loan. It will most likely be denied a loan if it poses a higher riskof not being able to pay back the loan.

The first thing a bank will look at when deciding whether or not to give out a businessloan is a business plan. Many other things are looked at by lenders such as the personalcred it history of whoever is applying for the loan, that persons experience, education,as well as feasibility.

All of those will be factors when determining how likely a business is to repay a loan, buta business plan will be the main focus. A business plan will provide lenders with valuableinsight into what the business wants to do with a loan.

A business plan shows many things, including how much money will be required from abusiness loan. A business that is just starting up will need to show its initial capital too. Abusiness plan should also describe how the money borrowed will be spent should a loanbe given out, as well as how the loan will be paid back and when.

A business will need to show in its business plan that it will be make enough profit torepay the loan. It also helps to show how a business plans to finance its operationshould it be denied the loan.


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3.15) Flexible Repayment Options

You can borrow any amount that you need for business purposes. Remember, you havedifferent options for repayment. Some lenders may offer you regular monthly paymentsthat range from one year to twenty years or longer.

When shopping for a business loan with monthly repayments, look for one that offers afixed rate. That means that you will always pay the same amount of interest, regardlessof the fluctuations of market rates that accompany the variable rate business loan.

This is especially important if your business loan is for the long term (ten years orlonger). This can save you tons of money over the life of the loan.

3.16) ICICI Business Installment loan

In this day and age of cut throat marketing, one cannot afford to loose focus. To reapthe benefits of lofty productivity, we need to put in a certain amount of financial

resources and hard work. All market sectors need an initial investment be it manufacturing, retail, leisure,farming, professional practice or service sector. Today, one doesnt need to bedistraught due to lack of funds. There are several lenders in the United Kingdom offeringbusiness loans.

Procuring a loan against collateral would give you the benefits of getting approval for alarger loan amount, paying a lower interest rate and settling for flexible repaymentoptions. However, if you are a tenant or do not wish to risk your property, you canchoose unsecured business loans.

In case of an unsecured loan, you have the advantage of quick processing time as noproperty evaluation is involved.

Encourage the entrepreneur in you. Instead give your business plans a concrete shapewith business loans. Whatever be your condition, business loans have something foreveryone.

All one needs to do is convince the lender about his/her repaying capability throughbank statements and annual income proof. Apply for one today and start your businessas early as possible.

Setting up a business venture b ecomes a childs play with this loan plan. So go aheadand see your dreams turning into reality.


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4.1) Objective The main objective of this project is concerned with getting the opinion of people

regarding Business term loan and what they feel about availing the services of Banks. We have tried to explore the general opinion about Business term loan.

4.2) Scope of the study

The research was carried on in the West Region of India. It is restricted to Ahmedabad.We have visited people randomly nearby my locality, different shopping malls, smallretailers etc.

4.3) Data sources

Research is totally based on primary data. Secondary data can be used only for thereference. Research has been done by primary data collection, and primary data hasbeen collected by interacting with various people.

4.4) Sampling

4.4.1) Sampling procedure

The sample is selected in a random way. It was collected through mails and personalvisits to the known persons, by formal and informal talks and through filling up thequestionnaire prepared. The data has been analyzed by using the measures of centraltendencies like mean, median, mode. The group has been selected and the analysis hasbeen done on the basis statistical tools available.

4.4.2) Sample size

The sample size of my project is limited to 140 only.

4.4.3) Sample design

Data has been presented with the help of bar graph, pie charts, line graphs etc.

Chapter 4: Research Objective


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5.1) Most Preferred Bank for Transaction Table 1

BankNo. of

Respondents% Responses

SBI 56 37.33

ICICI Bank 28 18.66

HDFC Bank 9 6

Bank of India 21 14

Bank of Baroda 14 9.33

IDBI 7 4.66

Axis Bank 8 5.33

Other Bank 7 4.66

Chapter 5: Data analysis and interpretation

0

5

10

15

20

25

30

35

40

SBI ICICIBank

HDFCBank

Bank of India

Bank of Baroda

IDBI Axis Bank OtherBank

37.33

18.66

6

14

9.33

4.66 5.33 4.66

Figure 1


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Interpretation

It has been observed that approximately 37% correspondents are using the service of SBI for their daily transaction, around 18% of people are using ICICI Bank for theirtransaction and only 4.66% & 5.33% of people are using IDBI and other Bank servicerespectively in Ahmedabad.

It also shows that SBI have the highest market position in Ahmedabad as per my sample.

It show the SBI has a largest banking structure in banking sector and able to gain trust of the people.

Other reasons are number of the branches, facilities provided by SBI and ATM centreavailable in Ahmedabad.


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5.2) Types of loans taken by people

Table 2

Types of LoanNo. of

respondents% Responses

Home Loan 34 22.67Business loan 50 33.33Education Loan 11 7.33Vehicle Loan 33 22

Personal Loan 16 10.67Other Loans,Specify

6 4

0

5

10

15

20

25

30

35

Home Loan Businessloan

EducationLoan

Vehicle Loan PersonalLoan

Other Loans,Specify

22.67

33.33

7.33

22

10.674

% Responses

Figure 2


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Interpretation

From the sample size 33% of people have taken business loan. From the 140 people22.67% of people took home loan. 22% of people took vehicle loan, 10% of people took

personal loan. Only 4% of the people have other types of loan which includes Educationloan and NRI loan.

This results shows that Gujarat is the state of Entrepreneur and many of the people areinterested in business, this could be the reason of higher ratio of for Business loancompare to other loans.

People have taken business loan for many reasons like to start new business, workingcapital, expansion of business and for new machineries.


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5.3) Most Preferred Bank for Business loan

Table 3

Bank No. of respondents % Responses

SBI 21 42ICICI Bank 9 18

HDFC Bank 3 6Axis Bank 7 14Industry specific

bank

8 16

Other Bank, Specify 2 4

0

510

15

20

25

30

35

40

45

SBI ICICI Bank HDFCBank

Axis Bank Industryspecific

bank

OtherBank,

Specify

42

18

6

1416

4

% Responses

SBI

ICICI Bank

HDFC Bank

Axis Bank

Industry specific bank

Other Bank, Specify

Figure 3


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Interpretation

Consumer survey shows that around 42% of the people prefer to take a business loanfrom SBI only, 18% prefers to take loan from ICICI bank and only 6% goes to HDFC bank.

4% of others go to the bank like Union Bank of India, Corporation Bank of India and Co-operative banks which are working at local level.

Why 85% of the people are going to SBI for business loan has many reasons like optionsgiven by bank to the consumers, low interest rates, amount of the money given by bankas loan, fast services for loan and SBI also gives loan and appreciate the people whohave new ideas for doing business.


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5.4) Criteria for Business loan by Consumers

Table 4

Criteria No. of respondents

%Responses

Term to maturity 15 30Ease to acquisition 3 6Interest rates 22 44Mortgage andregulations

10 20

0

5

10

15

20

25

30

35

40

45

Term to maturity Ease to acquisition Interest rates Mortgage andregulations

30

6

44

20

% Responses

Figure 4


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Interpretation

Above results show that interest rates for which the business loans are given is mostattractive feature.

Where term maturity was selected by 30% of people which refers to duration of loan.

Only 6% people believes that Ease to Acquisition is major factor for business loan and 20% believes that mortgage and regulation is very much important criteria for businessloan

Interest rate is considered ad most important factor because when any company orperson goes to business loan they look how much they have to pay extra that is interestamount.

This works all the businesses weather is small scale or large scale.

Also SBI has simple and fast processing system form diversified range of customers likefarmers, government empl oyees, SMEs holder, other business owners etc.


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5.5) Most liked features of business loan

Table 5

Features No. of respondents % Responses

Less paper work 3 6Attractive interest rate 22 44Transparency 9 18Simple & fast processing 6 12Flexibility to choose an EMI base loan or anoverdraft

7 14

Longer tenure lone for ease of repayment 3 6

0

5

10

15

20

25

30

35

40

45

6

44

1812 14

6

% Responses

Figure 5


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Interpretation

Results in above graph are matching with above result and here also attractive interestrate is mostly preferred by people.

44% of people believe that interest is most important, 18% believes that Transparency ismost and Flexibility in EMI is most required for them.

It can be inferred that interest rate is the key factor driving the consumer behavior as achief parameter for selecting the bank for taking loan. SBI is the market leader so peoplefeel more secure and benefited with regard to the policy and regulations because anymajor change in interest rates is initiated always by SBI which is followed by otherplayers.


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5.6) Reason for taking business loan

Table 6

Reason No. of respondents % ResponsesTo acquire fixedassets

23 46

For working capital 12 24To repay debt 8 16To expand business 6 12Others 3 6

0

510

1520

253035

404550

To acquirefixed assets

For workingcapital

To repay debt To expandbusiness

Others

46

2416

126

% Responses

Fi ure 6


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Interpretation

As assets are of various types likes instruments, equipments, lands, automotive vehiclesfor personal and business purpose etc which are preferred with a view to have benefitfrom it by paying it through a 11-16% of interest rates which are much perceived lowercompared to the rate of return achieved by acquiring the assets.

Also some requires working capital in order to continue the business which may be dueto availability of opportunity but lack of funds so such loans acts as a platform tocontinue their business.

Also various companies and individuals takes loan to repay their debt through bankfunds rather then using their own reserves in order to maximize their opportunity profit

through investment.


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5.7) Annual turn over of company who have taken loan

Table 7

Turn over (Lac.) No. of Respondents

0-10 611-20 821-30 1331-40 1641-50 350-60 2

61 above 2

0

2

4

6

8

10

12

14

16

18

0-10 011-20 21-30 31-40 41-50 50-60 61 above

Figure 7


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Interpretation

From this data it can be inferred that those individuals or companies which haveturnover too lower like 0 to 20 and those having very high amount of turnover above 40prefer less to have a business loan.

They rather prefer to having access to funds through different sources like personalfinance and other capital sources like short term financing or inviting partnerships.

Those having average turnover takes loan in order to fulfill their fund demand andcontinue their business so that personal funds and capital reserves are not required andthey can focus on the priority part that is operations.


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5.8) Types of the business the loan taker have

Table 8

Interpretation

Private company owners prefer to have a business loan because they usually have a

strategy to focus on their functioning and so in order to have ease to access to funds.

Business typesNo. of

RespondentsSole proprietor 7Partnership 17Private Ltd 23Other 3

0

5

10

15

20

25

7

1723

3

Figure 8


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5.9) Line of Business who has taken a loan

Table 9

Interpretation

Major customers are from the manufacturer area because they constantly needs funds tofinance their equipments and instruments purchasing demand whose cost are much higherwhich can block their personal funds if purchased by their own capital

Dealer 14Retailer 8Manufacture 26Other 2

0

510

15

20

25

30

148

26

2

Figure 9


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5.10) Future planning to take business loan

Table 10

Yes 36No 14

Yes, for which purpose Table 11

Reasons No. of Responses

To purchase land for business 3

For expansion of business 8To purchase machineries 12For working capital 6To purchase vehicle for transportation 3Build up inventory 4Improve facilities and conduct renovations 2

3

12

8

12

6

3

4

2

0

2

4

6

8

10

12

14

Yes No

Purchase land

For expansion

Machineries

Working capital

Vehicle

Inventory

Improve facilities

Figure 10


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Interpretation

When they were asked whether they were interested in taking loans majority of them

replied yes that they were looking forward to take loans in near future because now theirfinancial condition and turnover were increasing. Where in majority were planning to haveloans for fulfilling their capitals requirements for purchasing high cost machineries andequipments from local as well as other countries.

Other was also those who wished to take loans for expansion aspects. Now due toimproving condition of overall scenario people were looking forward to expand theirbusiness and increase their customer base for which they required capital in order tosupport the overall infrastructure.

There was also a section which wished to have loans for managing their working capitalrequirement as they were not able to perform efficiently due to lack of funds. Availability of such funds will help them to perform at a better efficiency level.

There were also a section of customers which wished to have loans for acquiringautomotive vehicles for personal as well as commercial use in order to have bettertransport facilities.

As per above graph 12 people have said NO for future panning to take business loan andreason given by most of them are like they have enough capital to manage financialfunctions and interest rates.


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6.1) Conclusion

From this project, we can conclude that ICICI Bank and SBI Bank are providing good businessloan in different categories. ICICI Bank and SBI Bank have large number of customers andproviding good services to them. India has been growing in terms of business and it will requirefinance which they can get from banks. A new business has to balance several equations whenit comes to operational front. Most entrepreneurs resort to business loans when funds fordiversification of the business are needed. ICICI and SBI both are providing good business loan.ICICI Bank has different categories of business loan. But difference come that, SBI has goodplans to provide this service to SMEs. SBI has come with some good business loan and theseproducts having the 1 st place in market; it has good opportunity to compete with ICICI Bank &to retain good prestige in market by fulfilling the requirement of customer. Even we can saythat the loan market in India adopts more or less the same principles when it comes to lendingmoney. Both banks are providing fast and friendly services to customers.

To be the largest advance product issuer, SBI and ICICI should focus on-

Launch Innovative product Customized advance products Better customer services Fastest customers problem solving techniques

Customer retention

Apart from all the above, SBI believe in providing good customer services to their customerswhich is a key factor for success in future.

Chapter 6


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6.2) Recommendation

Customer awareness programme is required so that more people should attract towardsbusiness loan.

If there are any kind of hidden charges than that must disclose to customer before giving loan to

them. SBI must take some steps so that customers can get their loan in time. Like phone verification bycustomer care that one customer is got their loan on time or not .It must be before a certaindate so necessary steps can be taken.

SBI should more concern about physical verification rather than phone verification so it willavoid fraud or cheating.

Advance product selling agents must not give any type of wrong information regarding advanceproduct.

For the better service new offers would be require. SBI and ICICI customer care should more concern about the fastest settlement of customer

problems. Before deducting or charging any monetary charge bank must consult with customer. Agents should be trained, well educated & proper trained to convince the people about

different advance product. It is the duty of the bank to disclose all the material facts regarding advance product, like

interest charged, repayment period, other types of charges, etc. Special scheme should be implemented to encourage both customer and agents. The bank should increase the period for repayment of loan. SBI and ICICI should more focus on Retaining existing customers. Banks must focus on Segmentation based on customer knowledge Product offering based on

customer demand. Banks must take feedbacks of customers regarding features & services.

Suggestions given by the consumers at the time of survey

There is more time period for repayment of business loan. Banks should take steps to solve customer problems immediately. Agents should be trained, well educated & proper trained to convince the people about

different advance product. Loan sanction date should be according to customer convenient. A customer awareness programme should be taking place in rural area.


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Questionnaire

We the students of STEVENS BUSINESS SCHOOL, Kalol are doing study on CONSUMERBEHAVIOUR for Business Term Loan. We would like to request you to fill up the questionnairegiven below. Your valuable feedback will help us in completing our project with the analysis of actual behavior of people towards this product of asset market.

Name - _____________________________________

Occupation- _____________________________________

Contact Detail - _____________________________________

Q. Which is your preferred bank for regular transaction?

a) SBIb) ICICI Bankc) HDFC Bankd) Bank of Barodae) IDBI (Industrial Development Bank of India)f) Axis Bankg) Other Bank, Specify (_____________)

Q. Are you aware of basic products & services provided by your bank?

a) YESb) NO

Q. If yes, are you aware of the advance products (Loan segments) of your bank?

a) YESb) NO

Appendix


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Q. Which kind of loan product you had used/ you are using?

a) Home Loanb) Business loanc) Education Loan

d)

Car Loane) Personal Loanf) Other Loans, Specify ( ______________ )

Q. Have you taken business loan any time?

a) YESb) NO

Q. If yes, which bank you prefer for taking business loans?

a) SBIb) ICICI Bankc) HDFC Bankd) Bank of Barodae) IDBI (Industrial Development Bank of India)f) Axis Bankg) Industry specific bankh) Other Bank, Specify (_____________)

Q. What are the criteria on which you choose the loan product?

a) Term to maturity

b) Ease to acquit ionc) Processing chargesd) Mortgage and regulations

Q. Which features you like most in business Loan?

a) Less paper workb) Attractive interest ratec) Transparencyd) Simple & fast processinge) Flexibility to choose an EMI base loan or an overdraftf) Longer tenure lone for ease of repaymentg) Specially design product for self employedh) Any other feature, specify ( _____________ )


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Q. Reason for taking business loan?

a) To acquire fixed assetsb) For working capitalc) To repay debt

d)

To expand businesse) Others (______________)

Q. What is your annual turn over in a given?

a) 2009 ___________________b) 2008 ___________________c) 2007 ___________________d) 2006 ___________________

Q. Which type of business are you in?

a) Sole proprietorb) Partnershipc) Private Ltdd) Public Ltde) Other

Q. Line of business you have/

a) Dealerb) Retailerc) Manufacture

d) Other

Q. Are you planning to take loan in near future?

a) Yesb) No

Q. If Yes, than for which purpose?

e are thankful to you for sparing your precious time with us. Your feed back will

be fruitful to us for fulfilling our objective of study.W


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http://www.icicibank.com/

http://www.sbibank.com/

http://www.sme.icicibank.com/businessloans_banner.aspx

http://www.comparebusinessloans.co.in/

http://www.businessloansindia.com

http://in.88db.com/delhi/q-SBI+Business+Loan/1/

www.bnet.com

Reference