As suggested by the name small business loans are offered to finance a small business. It may be that you are an established entrepreneur looking for staring a small business just for experiment. Or it may be that you are an energetic young thinking of trying your hand in commerce by starting a small business. Both of you can take out small business loans and finance the business you are going to start.

In stead of starting new small business set up small business loans can also be used for other business purposes. One can buy a new office space with a small business loan or to clear the outstanding payments of his suppliers. In order to pay off the due remuneration of the employees this loan can be made use of. Those who are going to set up new business establishments can buy business plants, equipment, machinery, raw materials etc. with small business loans.

One nice thing about small business loans is that you do not require borrowing a big amount of cash. Thus, you are not burdened with heavy debts. You can repay the loan rather quickly and get out of debt burden within short time. You may also have to pay fewer amounts in the form of interest.

Small business loans are offered in secured and unsecured form for which they can be taken by homeowners as well as tenants. If you are a homeowner and have the willingness to offer your home as collateral then you can go for secured small business loan. Otherwise, you can take unsecured small business loan.

People with poor credit record can also take small business loans. For them there are specialist lenders who do not fuss over the bad credit record but considers the repayment ability of the borrower. So if your present financial condition is stable enough then taking out a small business loan despite your poor credit record will not be difficult.

The days of living on cheap credit may be over. In a precursor to things to come, the country’s largest private sector bank — ICICI Bank — has hiked lending rates by 50 basis points (100 basis points = 1%) on retail loans. The bank has increased its floating reference rate (FRR) for consumer loans (including home loans) to 10.75% with effect from December 18. The bank has also increased its I-benchmark advance rate by 50 basis point to 13.75%. This increase will have an impact on corporate loan rates. ICICI Bank is expected to increase its lending rates, particularly home loan rates by 25 to 50 basis points. Apart from the prospective customers, the existing floating rate loan customers will also feel the pinch as the increase in FRR will become effective in their case from January 1, 2007. However, the current fixed rate customers whose loans are fully disbursed will not be impacted by the increase as their contracted rates will remain unchanged. A small consolation is that the bank has also increased interest rates on deposits of less than Rs 1 crore by 0.25%-0.75% across tenors with effect from December 18. State Bank of India, the country’s largest bank, had also increased its deposit rates similarly last week. ICICI Bank’s decision to hike rates comes RBI recently raised the CRR by 50 basis point in two phases. The hike in CRR will have an impact on the liquidity as banks will now have to park additional funds with the RBI. Banks have been averse to hiking retail lending rates, particularly housing loan rates, due to strong competition. However, the RBI’s recent action has forced banks to review their strategy.

The country’s major banks like ICICI Bank, SBI and Bank of Baroda are likely to follow HDFC Ltd in hiking the home loan rates by half a percentage point soon. HDFC Ltd increased its home loan rate from February 1 to 8.25% from 7.75%. However, hike in floating home loan rates will have an immediate impact on old borrowers, a banking source said. With steep competition among banks and finance companies in terms of attracting borrowers, the hike would not be completely passed on to the new borrowers. The source said a new customer could still negotiate a rate of 7.25 to 7.75%. Interestingly, while HDFC Ltd announced a hike, other companies like GE Money is offering loan at 7.25%. As floating rate is linked to a benchmark rate (hiked from 10.75% to 11.25% in case of HDFC), banks give loan at a discount to the benchmark rate.

An interesting deal took place recently that marked ICICI Bank’s foray into promoter financing.
The country’s largest private bank lent $40 million (about Rs 180 crore) against equity shares of Zee Telefilms to Delgrada, a Mauritius-based investment company owned by the media conglomerate’s promoter Subhash Chandra. While technically this transaction is a loan against shares, which a bank in India can disseminate up to Rs 20 lakh to an individual and up to 5% of its total loans of the previous year, the deal was uniquely structured to stay clear of this hurdle. Delgrada, which holds 14% stake in Zee, borrowed the money from ICICI Bank’s UK and Canadian arms but created the pledge of Zee shares in India. The loan is personally guaranteed A Zee Tele official told TOI that such a loan had been negotiated. ICICI Bank has actually refinanced an earlier loan that Chandra had borrowed from Singapore-based CSFB in 2003, the official added. The deal then ran into a bit of rough weather. Though the deal was cleared by the Reserve Bank, it was conditional upon the foreign investment promotion board (FIPB) having no objection. FIPB’s consent was required because the ownership of equity would have changed if the borrower defaulted on the loan. It was delayed when Sebi wrote to FIPB asking it not to clear the loan as it was investigating some issues relating to Zee Tele shares and the ownership of its offshore investment vehicle Delgrada. by Subhash Chandra.

GE consumer Finance, the global consumer lending unit of General Electric (GE), has completed the entire range of its financial services offering by entering the housing loan market in India. The company has set up a new wholly-owned subsidiary — GE Money Housing Finance Company (GEMHFC) which will get into housing loans, targeting, what the management called, upper-middle class and affluent consumers. The company will adopt GE’s new worldwide brand ‘GE Money’. It has received approval from the National Housing Bank — the regulator for the housing sector — to transact business. ge loans The company has been set up with a paid up capital of Rs 10 crore and is eyeing disbursals of Rs 600-1,000 crore in the first year of operations. Scott Bayman, president and CEO, GE India, in an exclusive interview with ET said, “Capital is not a concern. Considering our triple A (AAA) rating, we can do business up to 20 times, ie, Rs 200 crore. As the business grows, we will pump in more capital.” GE is studying the banking sector in the context of the recent developments in the sector. “Asia has contributed 80% to the global wealth creation in the last year. In the light of these developments, we are doing a feasibility study. The study also includes getting to liabilities (deposit mobilisation),” explained Mr Bayman. But he ruled out the possibility of GE getting into insurance business. “Worldwide, we have been exiting insurance. We will maintain the same stance,” explained Mr Bayman. The new housing subsidiary is also being used to test the Indian response to the new brand ‘GE Money.’ The re-branding exercise is expected to continue till June ’05. India is the first Asian country where this re-branding initiative has been launched. Slowly, all existing GE Countrywide products that include auto loans, consumer durable loans, personal loans and home equity loans against property, will be brought under the GE Money umbrella. This will, however, not affect GEs existing joint ventures with Maruti and the State Bank of India. Mr Bayman added, “We are increasing our focus on retail finance in India. Our expansion into long term, high-ticket mortgage and personal loans signifies our commitment to India and reaffirms that we are here for the long term.” He added, “Capital of the new company is not going to be a constraint going forward and GE is committed to invest more in India as and when opportunities come up.” Vishal Pandit, president and CEO, GE Money India, said, “55% of all retail lending in India is in the home segment and we were completely absent there. With interest rates rising, its just the right opportunity to enter the market.” To start with, GE is only looking at flexible interest rate products with 7.5-8.5% rate band for the home loan portfolio. Ridha Wirakusumah, president and CEO, GE Consumer Finance Asia, said, “India has been identified as one of the four BRIM countries apart from Brazil, Russia and Mexico as GE Money’s four focus markets. India is growing at the rate of 40% annually for us.” GE Consumer Finance has an asset base of $970m in India, which is about 15% of its total Asian asset base. GE Consumer Finance, now GE Money, is the third-largest business unit of GE globally with assets of $117bn.

The RBI decided to hike the provisioning requirements for banks on home loans, leading to a hike in home loan interest rates. The Reserve Bank of India (RBI) announced its slack season credit policy recently. Every time the policy is about to be announced , the market participants - banks, financial institutions , including the borrowers - all look for the RBI’s direction of interest rates. The credit policy contains explicit as well as implicit measures to tackle the monetary situation of the economy. The policy tends to address the macro and micro aspects so as to maintain the growth momentum of the economy.
The RBI’s latest annual credit policy statement spelt bad news for home loan borrowers. In a major move, the central bank has decided to hike the provisioning requirements for banks on home loans. RBI has decided to increase the provisioning requirement from 0.4 percent to one percent on home loans as well as commercial real estate loans beyond Rs 20 lakhs. With this new requirement, banks have to keep aside Rs 100 for every Rs 10,000 given out as home loan. In another major development , the RBI has raised the risk weight and exposures to commercial real estate loans from the erstwhile limit of 125 percent to 150 percent. According to RBI, these moves have been taken as precautionary measures. The bank has initiated these measures as a precaution so as to prevent over exposures in one sector. Loans to real estate have grown by about 85 percent during the last nine months till January 2006. On a recent review of the flow of bank credit to the housing sector, particularly to land developers and builders, the RBI found that the majority of banks were not complying with the prescribed control mechanism for managing risks involved in such transactions. The RBI has been repeatedly cautioning banks that there was a need to curb excessively risky lending by strengthening the loan approval process.This has been pointed out by the RBI in its successive credit policy statements and the quarterly reviews of the credit policies. It has been underpinning the fact that the banks should control their aggressiveness in going ahead with credit to the real estate sector. Earlier, RBI had again advised that while appraising loan proposals involving real estate, banks should ensure that the borrowers should have obtained prior permission from the government and other statutory authorities for the project, wherever required. To ensure the loan approval process is not hampered on account of this, while the proposals could be sanctioned in normal course, the disbursements should be made only after the borrower has obtained requisite clearances from the government authorities. The RBI has resisted the move to go in for an across the board increase in interest rates. It was in a dilemma because raising interest rates would have slowed the growth momentum and keeping them unchanged would fuel inflation and unbridled credit expansion . The RBI has sought to control the credit flow by marking up the provisioning norms for banks lending to capital market related activities and property development and purchase. Banks have now been asked to keep aside Re 1 every time they lend Rs 100, increasing the cost of financing these segments. The move as expected led to an increase in the interest rates on home loans. These measures may lead to a hardening of the interest rates in the housing loan market and banks would need to set aside additional capital to meet the new and increased requirement .

The interest burden on most home loans would come down, if the Su-preme Court upholds a “cease and desist” order issued by the Mo-nopolies and Restrictive Trade Practices Commission (MRTPC) against HDFC. The housing loan major’s review petition in the Su-preme Court is slated for hearing soon. MRTPC has found HDFC’s method of computing interest charges on its home loans to be a ‘deceptive trade practice’. At stake is the method of annual rest being followed by the lending institution where a monthly rest is more appropriate. HDFC and several other home loan providers use the annual rest method and say so upfront in their loan documents. But the commis-sion feels that such disclosure falls short of transparently explaining to the borrower the implications of the terms he agrees to. The ‘annual rest method’ provides for the principal amount to be re-accounted, crediting the repay-ments made every month by way of equated monthly instalments (EMIs), only at the end of the fi-nancial year. In contrast, in a monthly rest system, the principal amount on which interest is pay-able is reduced every month. The extent of reduction depends on the loan repayment (amortisation) component of the EMI, which is a combination of both loan repay-ment and interest payment. The total interest burden would be ap-preciably lower in the case of monthly rest, as compared to yearly rest. The extent of relief would depend on the duration of the loan. The MRTP Commission has asked HDFC to stop following the annual rest method. The Supreme Court has asked the commission to re-spond to HDFC‘s appeal against the commission’s ‘stop this practice’ order which said the ‘annual rest’ system of EMI computation is a ‘deceptive trade practice’. MRTP held this as a deceptive practice since the consumer is not informed about this way of calcu-lation. In this particular case, the consumer who approached the commission had to pay 0.37% more than the 18% quoted by the institution. Sources told ET that the depart-ment of legal affairs is expected to file the reply on the commission’s behalf in the next few days. When contacted, the HDFC spokesperson declined to respond as the issue is subjudice. Industry sources said that some banks go for the monthly rest sys-tem of deducting principal every month and levying the interest on the reduced principal in the subse-quent month, while others follow the annual rest method. During the hearing, HDFC had in-formed the commission that the annual rest method was recognised by the National Housing Bank, the principal body to promote housing finance institutions. However, the commission’s order last December says NHB has denied this. HDFC filed a review petition before MRTPC in February this year, which was rejected. The apex court’s view on this is expected to impact the industry significantly.

Home loans have become a lot more expensive. But the fizz in Mahrashtra’s property market remains, going by the stamp duty revenues of the state government. Collections from stamp duty grew by 28% to Rs 2,030 crore up to July compared to Rs 1,580 crore in the same period last fiscal. Of the total revenues, around 60% is from property transactions. Going by the trends so far, revenues are expected to top Rs 6,000 crore by the end of this fiscal. Of course, leading lenders hiked home loan rates this month to cool the housing loan growth. Analysts reckon that 0.5% increase in the interest rate may not impact purchases by genuine buyers. In April this year, the RBI raised the provisioning requirements for banks on home loans above Rs 20 lakh. The central bank’s discomfort over the build-up of an asset price bubble also prompted it to raise the risk-weight on exposures to commercial real estate. “The trend in registrations and stamp duty revenues show that there has been no slow-down in demand. There has been some price correction, though, in the rates for residential property in a few prime locations”, said Om Prakash Gupta, Inspector General of Registration, Controller of Stamps and Chief Controlling Revenue Authority, Maharashtra. Total registrations stood at 6.21 lakh in the first four months — which is one third of the total registrations in FY 06. There’s been a spurt in property deals valued at over Rs 30 lakh. According to him, the buoyancy in stamp duty revenues comes on the back of a huge spurt in legal transactions in property, This has happened after the rationalisation of the structure of stamp duty payments on Investors Agreements last year. An investor who buys one or more units from a developer and sells it within three years gets a stamp-duty rebate. The amount of stamp duty payable on the re-sale price can be lowered by claiming a set-off on the duty paid at the time of purchase. To bolster revenues, the government brought new categories of instruments under the stamp duty net — instruments relating to advertisement and mass media, telecasting and broadcasting. It also levied stamp duty on record of transaction effected by a trading member through a stock exchange (within Mahrashtra). Mr Gupta reckons that these amendments carried out in the Bombay Stamp Act in ‘05 have started yielding results.Maharashtra has budgeted revenue receipts from stamp duty and registration fees at Rs 5,600 crore for FY07. The budget estimate is likely to be surpassed.

ICICI Bank has increased home loan rates by half a percentage point in both fixed and floating rate schemes. The new rates will be effective from May 8 for new customers, while for existing customers, it will be effective from July 1, in line with the bank’s policy of resetting rates on a quarterly basis. The existing fixed rate home loan customers will, however, not be impacted by this increase and their contract rates will remain unchanged, the bank said in a statement. This move will increase the interest rates on floating rate home loans from 8.5% to 9%. The interest rate on fixed rate home loans will also go up from 9.75% cent to 10.25%, the bank said. In most of the cases, the bank will not increase the equated monthly installment (EMI) but will increase the tenure to adjust the rise in the interest rates. However, a senior banker said that in the case where the new increased tenure goes much beyond the retirement age of a borrower, the bank will change the EMI so that the enhanced tenure should coincide with the retirement age. For a person who had borrowed a 20-year loan at 7.5%, will see his tenure increased to 29 years and eight months. The EMI at 7.5% is Rs 806 only. But the EMI at 9% is Rs 900. So if his EMI is to be kept at Rs 806 only, the tenure will increase to 29 years and eight months. Similarly, those who have borrowed at 8%, will see their tenure increased to 25 years and four months. Those, who had borrowed at 8.5%, the increase in the tenure would be to 22 years and three months only. Other banks like HDFC, SBI and Punjab National Bank have already increased the rates. The present round of increase in the rates was mainly on account of RBI’s decision to increase the provisioning norms and capital requirements on home loans given by banks.

here is the latest on the personal loan front apnaloan.com brings you personal loans at zero per cent but with a difference. it’s the cash you want, but you also get loans in kind. consider this. when you apply for a personal loan worth rs 50,000 at zero per cent under this offer, on approval you will get rs.40,000 towards your loan amount and you can choose the products you want for the balance rs 10,000. you can choose from over 50 products of leading manufacturers, amongst them leading consumer durables, jewellery, and lots more. hsbc’s personal loan for salaried individuals: wish you had enough money to do up your home? or send your child for that course you know is good for him? maybe buy that computer. or, just anything at all. now you can do all this and more, with a personal loan from hsbc and get up to rs. 8,00,000 for up to four years. you are eligible if you are at least 25 years of age. you must also reside within city limits where hsbc has branches. you should also have been in service for a minimum one year and in the current residence for at least one year. go, buy a home several players, many competitive offers. look before you select one of the many home loan options in the market. here’s a comprehensive survey of the home loan market n vidhyasagar there has never been a better time to buy a home. property prices are at a low. the buyer rules the market. lenders are becoming lenient and interest rates are at an all time low. however, read the fine print in lenders’ offerings, and weigh the pros and cons of their competitive pricing and services before you settle on a particular lender. more specifically, look at the “hidden costs” before picking a loan. here are some of the key players in the market ready to fund the roof over your head: icici: a big player with a large slice of the home loan market. interest rates on home loans have come down considerably in the last few years. in order to pass on the benefit of lower interest rates to borrowers who might have taken high interest home loans earlier, icici home finance has announced a balance transfer scheme. under this scheme, customers can replace their existing high interest loans by cheaper (equal to applicable current rates) loans from icici home finance. the amount and tenure of the new loan will be equal to the balance amount and tenure of the existing loan. for example, if a customer had taken a loan of 10 years in 1997, he would pay interest rate in the range of 17 per cent. by shifting the loan to icici home finance, the rate will come down to as low as 12.25 per cent. for one to five years icici levies an interest rate of 10.75 per cent, for 6-10 years 12.25 per cent, 11-20 years 12.50 per cent, and 21-30 years 12.75 per cent. contact 4308080. hdfc: it has a friendly image and ranks among the top lenders. hdfc offers home loans for constructing or buying a home, or even for adding to, or renovating your existing home. it offers a maximum loan of up to 85 per cent of the cost of property. hdfc lends a maximum of rs 1 crore. the maximum period of repayment is 15 years or retirement age, whichever is earlier. its interest rate ranges from 10.75 per cent to 12.50 per cent, based on the quantum of loan. for more info contact: 6103146 and 6103147. lic housing finance: it sanctions and disburses loans faster than what people normally perceive in the market. if you have all the documents ready, lic can sanction your loan in 30 minutes flat. lic offers home loans for construction/purchase of house/flat and also for renovation of existing flat/house. lic offers a maximum loan of up to 75 to 80 per cent of the cost of property. its emi per lakh works out to rs 1,240 for a fifteen year period. they are currently offering to switch you to the new, lower interest rate scheme. the home loan comes with free lic policies. you can reach for lic home loans at the following phone numbers: 3232830, 3216923. hsbc: the bank enjoys high regard in the market. it charges an interest rate of 12.5 per cent on a daily reducing basis. for a rs 10 lakh loan to be repaid in 15 years, hsbc’s emi works out to rs 12,310. the maximum loan offered is rs 1 crore, and the bank prefers to target the salaried class as target customers. they have four branches and dealers all over the city. normally hsbc disburses loans in a week’s time. you can reach them at 9810194166 and 9810330655. state bank of india: it has seven personal banking branches in delhi specialising in housing loans. home loans are also available at most of the 200-odd state bank of india branches all over the city. while there is no upper limit on the amount of loan, they determine the actual loan amount on the basis of repayment capacity, which takes into account your income, age, assets and liabilities. the maximum loan amount is up to 48 times the net monthly income. the bank expects you to contribute 15 per cent margin for a new house/flat, 20 per cent for old house/flat and 30 per cent for purchase of a plot of land. its emi works out to rs 1220 for rs 1 lakh to be returned in 15 years. if you have all the documents ready, the loan is disbursed in a day’s time. for more details call 3361070 punjab national bank: pnb’s apna ghar yojna disburses loans to individuals who are in permanent service or self-employed or engaged in business activities. the loan is disbursed either in lumpsum or in installments, depending on requirement. if you agree to repay a rs 10 lakh loan in 7 years, they levy an interest rate of just 11.75 per cent. for the same amount to be repaid in 15 years, they charge 12.25 per cent.contact: 3357171 and 3357172. bank of punjab: they have no processing fee, no pre-payment charges and no requirement of guarantors. it offers loan for a maximum term of 25 years with comprehensive insurance. its emi per lakh for five years works out to rs 2148 (9.10 per cent), 10 years rs 1,444 (11.48 per cent) and 15 years rs 1214 (11.85 per cent). for more information log on to bankofpunjab.com or call 6373434. birla home finance: a private player, but very aggresive in the market. unlike other players who deal via dealers, birla home finance officials deal directly with customers. if you have all the documents ready, you can get the sanction letter in a matter of hours. for more info, you can call 6529772. hudco: the objective of hudco is to finance and encourage housing activity in the country. hudco niwas offers home loan assistance to construct, or to buy a house or a flat. they have recently announced a further reduction of upto 0.75 per cent in its housing loan interest rates and cut processing and administration fee by 0.20 per cent. call 4625308. maharishi housing finance: maharishi has reduced interest rates on home loans from 12.95 (fixed p.a) to 12.5 per cent (fixed) on all loans for five years and above. the rate of interest on variable rate loans shall continue to be at 12.95 per cent. call: 6959793. citibank: undoubtedly, its service is the fastest in the market. the self-employed get maximum benefit from citibank since they can get a higher quantum of loan sanctioned. for those who may have assumed citibank to levy a number of hidden costs, company officials said that it is a wrong assumption and the citi deal is quite upfront. it has an interest rate of 13 per cent for salaried class on daily reduction basis. for more details call 3323910 and 3323913. standard chartered: stanchart offers the best of the home loan deal in the market. its emi for rs 1 lakh (for 15 years) comes to rs 1,220. they have fixed their interest rate at 12.3 per cent on a daily reducing balance. contact: 3366341 maximum emi allowed to the applicant is 50 per cent of his net monthly income. you would be required to provide latest salary slips showing statutory deductions, form 16 (tds certificate from employer) for last two years, age proof, residence/office proof, and bank statement for the last six months from your operative account. what are hidden charges: the effective rate of interest might work out to be different from the rate announced by the lender. this could be due to several costs, which are not apparent upfront. one of these is reducing frequency. some lenders follow daily rest for taking into account the reduced principal, whereas other lenders follow the monthly or quarterly rests. it goes without saying that the customer stands to gain in case of daily rest. there are certain processing, overhead and administrative charges involved that are charged to the borrower. administrative charges levied are generally taken as a percentage of the loan amount, some times subject to a maximum and minimum amount. some lenders levy a prepayment charge. other charges also have to be taken into consideration by the borrower, which ultimately affect the effective rate of interest charged to the borrower. the borrower should do a comparative analysis of the different schemes.