What is Corporate Loan?

08 January, 2024

Building a business from the ground-up is a rather Herculean task. Whether you are just launching a business or have established one, you need to consider various aspects from administration to manufacturing. Whatever business you choose to pursue, you need sufficient funds to keep it running. Financing is, in every sense, the heart of every business, as without it, a business can collapse. One way to get funding for your business is to obtain a Corporate Finance Loan. Here’s everything you need to know about Corporate Loans and its types.

What Is Corporate Loan?

A Corporate Finance Loan, also known as a Corporate Business Loan, is a financial facility that provides businesses with the required funds to manage the various aspects of their business. Such loans are typically provided to companies, as opposed to individuals. The funding offered usually depends on the type of business you own, its size (whether it is starting-up or established), and similar other parameters. You can use the funds from this loan to manage expenses like procuring capital, acquiring assets, paying wages, buying machinery, etc. Essentially, the loan amount adds to the business’ working capital.

Types of Corporate Loans

Corporate Business Loans are essentially categorised into several different types. The most common ones include the following:

• Working Capital loans
  
  The most basic type of Corporate Loan, you can avail of this to fund the daily needs of your business. This type of loan is typically designed for seasonal businesses; those that do not involve regular sales or earn revenue all year long. Such a loan is not designed to fund expenses associated with business expansion or asset purchase. Instead, it enables businesses to manage their short-term business liabilities like procuring raw materials, paying monthly overheads, managing inventory, etc.
  
  

• Line of Credit
  
  Banks offer a line of credit to businesses to help them fund their ever-evolving business needs. Under this form of corporate lending, businesses can draw on the facility whenever they need funds. However, the amount of funds they borrow may not exceed a predetermined limit. Banks charge interest only on the amounts used by the borrower. You may obtain a line of credit in the form of an overdraft, a demand loan, a term loan, etc., and easily tap in to the source of funds at your discretion.
  
  

• Short-term Loans
  
  Businesses that need funds to finance their sudden and immediate needs can avail of the Short-term Corporate Loan facility. As the term suggests, these loans come with shorter repayment tenures, and the amount loaned is also usually smaller than what you can obtain with most other forms of Business Loans. However, the interest rates levied on these loans tend to be higher since these loans are deemed riskier.
  
  

• Equipment financing Loans
  
  If you need funds to purchase the necessary equipment to run your business, you can apply for an equipment financing Corporate Business Loan. You can use the funds from such a loan to procure various kinds of equipment necessary for your every business needs. For instance, hospital owners may need funds to purchase equipment like X-ray machines, wheelchairs, ventilators, stretchers, surgical tables, patient monitors, EKG/ECG machines, etc.
  
  

• Loan Against Future Receivables
  
  A Loan Against Future Receivables is a Corporate Finance Loan you can obtain if your business is involved in a supply chain. Here, the expectation is that you will repay the loan from the funds accrued or generated from your existing or future trade receivables. Most lenders typically ask you to provide some security or collateral if you opt for this type of Corporate Loan, whereas a few others may offer the loan without any collateral.
  
  

HDFC Bank’s Corporate Loans

At HDFC Bank, we empower businesses of all shapes and sizes to obtain funds to keep their businesses up and running. With the HDFC Bank MyBusiness offering, we provide several loans that can help you grow your business, while we handle its growing needs. MyBusiness is our one-stop digital solution platform that gives our entrepreneurial customers easy access to business financing. Not only do we provide Corporate Loans through this channel, but we also arm you with the essential knowledge that empowers you to build and run a successful business.


*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.