Flexi loans are one of the best types of business loans to meet all the financial needs of a business. They can be used to meet both short term needs and long term needs. Besides, they can also be availed to purchase equipment, expand the business, increase working capital, or buy raw material.
What is a Flexi Loan?
A Flexi loan is a lending facility where the borrower is approved a loan limit for a pre-decided tenure. The borrower can withdraw the amount he needs as and when required or he may also utilise the entire amount in one go as well. The interest is only charged on the amount utilised. This is a unique feature of the Flexi business loan that stands it apart from other traditional business loans.
Flexi Business Loan Features
Pay Interest Only on the Loan Amount Used
In the Flexi loan, the interest is paid only on the loan amount utilised and not the entire loan limit sanctioned. In other types of loans including government scheme such as MUDRA loan, the interest component is applicable on the entire loan amount. Even if the borrower doesn’t use the entire loan amount and keep some spare in his bank account, he will have to pay interest on the entire loan amount. However, it is not the same scene in the Flexi loan, which also means that EMIs are lower, making them affordable. Let’s now understand with the help of an example:
Suppose a business owner avails a Flexi loan of Rs. 5 lakhs at a yearly rate of 18%. He only withdraws Rs. 2 lakhs from his account. The interest would be applicable only on the amount withdrawn, i.e. Rs. 2 lakhs. If the amount is withdrawn for a year, the business owner will have to pay Rs. 2,36,000 (Rs. 36,000 will be charged as interest).
However, in case of other business loans, the interest would apply to the entire amount of Rs. 2 lakhs and the business owner will have to pay Rs. 5,90,000 (where interest is Rs. 90,000).
EMIs comprising only Interest Component can be Paid
The EMIs for the Flexi loan comprises of the interest only. Unlike other business loans, the EMIs can comprise of the interest component only, and the principal amount can be repaid at the end of the tenure of the loan. This feature, too, lower downs the EMI amount. However, the business loans comprise of both the principal amount and the interest cost. It totally depends on the borrower whether to include the principal amount or not in the EMI.
Collateral-free Business Loan
Flexi loans are unsecured loans where there is no need to provide collateral. Reduced documentation leads to the processing and approval of the loan application faster.
Benefits of Flexi Business Loan
All-time Availability of Cash
With Flexi loan in hand, the business owner can always be ready for all the unexpected financial crunches. In Flexi loan, the loan amount is pre-approved, which can be withdrawn as many times required within the provided tenure and credit limit.
Ease of Repayment
Flexi loans are affordable as they come with convenient repayment options. The options make the repayment easier as the borrower can repay the loan as per his requirements and desire. Thus, the repayment of the Flexi business loan becomes easier, which eventually leads to having access to funds whenever required. The business undoubtedly can make quick progress with the loan.
Withdraw as many Times as required
A credit limit is sanctioned in the Flexi loan, and the business owner can withdraw cash as and when required. In situations where the business owner requires immediate cash, a Flexi business loan comes handy. There is no need to apply for a loan every time but just withdraw the same from the account. Notably, the amount can only be withdrawn up to the credit limit and within the sanctioned time period.
Minimal Documentation Requirement
Flexi business loans are pre-approved, and there is minimal documentation required by the loan lender to process the loan application. This saves time and effort and also promotes the fast processing of the loan application.
Lesser Interest Rates
Flexi loans also come helpful as the interest cost is reduced to only the amount used. When the borrower avails this loan, the interest is levied on the amount withdrawn from the account and not on the entire amount. This implies the business owner is able to save interest cost and the EMIs are pocket-friendly for him.
Flexi business loans are useful for a business owner, and they can be utilised to fulfil the needs of a business owner. They offer maximum flexibility with multiple repayment options and use of loan amount. For availing a Flexi loan, the borrower has to fill the loan application on the website of the lender or visiting him in person. Fill the form with correct information and the lender will next process the application.