When applying for an SME loan there are a number of service charges which the financial institution adds to the loan application besides the SME loan interest rate. The process of obtaining a loan from financial institution takes time as there are a number of requirements that need to be made. There are four main types of SME loans which are offered to startups namely Plant and Machinery Loan, Property Term Loan, Medical Equipment Loan and Business Loan.
When one sends in their application for an SME loan, there are a number of extra charges and fees they will be required to pay to the financial institution. Some service charges that any applicant must be aware of when applying for a loan are:
This fee is charged by the financial institution to subsidize the costs of the payment systems. The fee is charged when the individual decides to make a payment though debit, credit or charge cards. The fee passes on the costs on the borrower for obtaining appraisals, credit history, documentation and other required information. Usually the processing fee which is charged by a financial institution is a percentage of the loan amount being applied for.
Overdue charges on default
When an applicant applies for a loan, they are required to pay a certain amount each month as EMI. This amount will remain fixed if the individual applies for fixed interest and varies if opting for floating interest rate. If the borrower is unable to meet his monthly repayment requirements the financial institution can fine the borrower with overdue charges on defaults.
Legal and Technical fee
When an individual has submitted their application for a loan, there are a number of stages of verification which are performed. All financial institutions have their own team of legal and technical experts who verify the application along with all the documents provided. In many cases the financial institution charges a legal and technical fee from the applicant. In some financial institutions however, these charges are added along with the processing fee.
Some financial institutions have a clause which state that if any applicant prepays their loan before a certain period, they will be fined with prepayment charges. The penalty is usually decided based on the percentage of remaining loan balance or a certain number of month's worth of interest.
Besides the SME loan interest rate, there are a number of charges one has to repay along with the loan amount. All loan applicants must be aware and pay these charges on time to ensure they face no issue during the application and repayment of the loan.