Corporate Finance Loans – A Complete Guide forBusinesses

In the dynamic world of business, access to timely finance can make the difference between growth and stagnation. Whether it’s managing daily operations or executing large-scale projects, the right type of loan ensures smooth financial management. Below is a simplified guide to the major types of corporate finance loans every business should know.

1.  Working Capital Loans

Purpose: To meet day-to-day operational needs like salaries, raw material purchases, utility bills, and short-term obligations.

Examples: Overdraft (OD), Cash Credit (CC), Short-term loans.

Tenure: Up to 12 months, often renewable annually.

Security: Typically secured against stock, receivables, or property.

• Ideal for businesses with seasonal demand or cash flow

Special Highlight: CGTMSE Working Capital Facility

• Businesses can avail working capital loans up to ■10 Crore without collateral under the CGTMSE (Credit Guarantee Fund Trust for Micro & Small Enterprises) scheme.
• Hybrid Option: Clients can also get funds with partial collateral + partial
• Benefits of CGTMSE:
• Collateral-free credit for
• Coverage for both term loans and working
• Helps first-generation entrepreneurs and small businesses access formal

2.  Term Loans

Purpose: Long-term investments such as setting up a plant, purchasing property, or machinery.

Types:

• Short-term: 1–3 years
• Medium-term: 3–5 years
• Long-term: 5–25 years

Repayment: Fixed monthly or quarterly instalments.

• Best suited for business expansion or modernization projects with a long repayment

3.  Project Finance

Purpose: For large-scale infrastructure or industrial projects where repayment is linked to project-generated cash flows.

Examples: Power plants, manufacturing units, highways.

Structure: High-value, long tenure, often involving multiple lenders.

Subsidies Available in Project Finance:

• Central & State Government Industrial Policies (capital & interest subsidies).
• MSME Subsidy Schemes for small & medium
• Renewable Energy Subsidies for solar, wind, and clean energy
• Infrastructure Development Subsidies under state/central
• Subsidies reduce overall project cost and improve financial

4.  Equipment / Machinery Loans

Purpose: To finance the purchase or lease of specialized equipment, vehicles, or new machinery.

Special Feature: The equipment itself often serves as collateral.

• Helps businesses upgrade technology and boost

5.  Trade Finance

Purpose: To facilitate import and export activities.

Products: Letter of Credit (LC), Bank Guarantee (BG), Export Credit, Bill Discounting.

 

PCFC Scheme for Exporters:

Exporters can benefit from the Pre-shipment Credit in Foreign Currency (PCFC) scheme, where they can avail working capital loans in foreign currency at competitive international interest rates.

• Benefit: Lower borrowing cost as compared to INR
• Use: Helps exporters finance raw materials, manufacturing, and shipment expenses until export proceeds are
• A lifeline for companies engaged in cross-border

6.  Loan Against Property (LAP) – for Business

Purpose: Raise large funds by mortgaging commercial or personal property.

Use: Suitable for expansion, working capital, or debt consolidation.

Flexible Repayment Options:

• Pure EMI structure (fixed monthly instalments).
• Overdraft (OD) facility against
• Hybrid LAP (part OD + part EMI).
• If the client has balance funds after EMI, an OD facility is best since interest is charged only on utilized

Example:

• Loan of 1 Crore for 20 years:
  Term Loan at 9.25% Fixed EMI every
  LAP OD 50% Pay interest only on the amount utilized (e.g., if only 40 lakh used, interest is charged only on that).
  This makes LAP OD ideal for businesses with fluctuating cash requirements.

This makes LAP OD ideal for businesses with fluctuating cash requirements.

7.  Bill / Invoice Discounting

Purpose: To get instant funds by selling unpaid invoices to banks or NBFCs.

Benefit: Improves liquidity without waiting for long payment cycles.

• Available across private banks, government banks, and NBFCs – widely accepted and simple to

8.  Overdraft / Cash Credit

Purpose: Flexible access to funds up to a pre-approved limit, with interest charged only on the utilized amount.

Users: Businesses with fluctuating working capital needs.

Common Types of OD Loans:

• Home Loan OD (HL OD)
• Loan Against Property OD (LAP OD)
• Agriculture OD
• Business OD / Cash Credit
• Personal Loan OD
• OD loans provide cushion against irregular cash

9.  Syndicated Loans

Purpose: Large loan amounts shared by a consortium of banks/financial institutions.

Use: Corporate acquisitions, mega projects, and large-scale expansions.

• Spreads risk across lenders while meeting massive capital

Final Thoughts

Corporate finance loans are not one-size-fits-all. The choice depends on your business stage, funding requirement, repayment ability, and growth vision. From short-term working capital needs to billion-dollar infrastructure projects, financial institutions offer a wide array of solutions to help businesses scale with confidence.

• Before availing a loan, always compare interest rates, check hidden costs, and consult a financial advisor to select the right product.