As we know that loans are another way of bucking up the financial requirements and these days like ancient times, business loans are still what majority of the businesses look upto! There will hardly be any business that has never seen the loan structure. Now, as we know that the loans have the repayment schedules where the principal amount is to be returned along with the interest rate that has been charged with may be the processing fees that would have been charged for the loan that is borrowed. The EMIs that are to be repaid usually are in the fixed scheme when the borrower has to repay a fixed amount of the part every month!
Considering a few of the personal loan like ICICI personal loan and the flexi EMI option that they offer, these can be a suitable option for any of the business. After looking at the different types of flexi (Flexible) EMI (Equated Monthly Instalments) we would discover how is this option suitable for the business.
There are 3 types of flexi EMI options.
• Step Up Flexi EMI Options
• Step Down Flexi EMI Option
• Bullet Flexi EMI option
Step Up Flexi EMI Options
In this arrangement, the EMI for repayment is on the increasing side. In the initial years the EMI that is to be paid is lesser and as and when the time passes by, the EMI structure increases. With the usual logic, in any business the initial years are crucial and can be difficult in few cases to pay the heavy EMIs initially, so this scheme allows the borrower to stay at ease in the start and then when the business grows, the EMI structure demands more amount to be paid and hence the whole scheme!
Step Down Flexi EMI Options
This arrangement is exactly opposite to the one mentioned above. Here, the initial years will have major amount to be paid and eventually the EMI amount decreases. The loans mostly have higher interest rates initially and then it decreases with over the period of time. So, when the major chunk of the borrowed amount is paid initially, it is best that in the end, all the amount that is left will have a smaller amount of interest to be paid in order to save you money while the business and already flourished!
Bullet Flexi EMI Option
In this option, when the EMI scheduled year ends, the borrower can pay a lump sum amount from the profit that the business has made in order to reduce the burden and that may sometimes lessen the tenure of the loan too! Also, unlike other loans where if the amount is repaid at an early stage than the actual tenure there may be prepayment charges that would be applicable. But herein, that will not be an option. As there is already an arrangement that if the business is doing well and the borrower can pay the amount at the end of each year making this a squeezed option for the business.
Now the question arises is, why Flexible Equated Monthly Instalment and not fixed? When it comes to the salaried individual where the incomes are fixed, fixed EMI options work well. The profit margins or we can say the turnover varies when it comes to business. So, a flexible option may help it better for the borrower to get to explore various options. Different business will behave differently in the quarter and the yearly finance. It then becomes the borrower's responsibility to check various permutations and combinations and analyze which will be best suited.
Also, when it comes to checking the credit score, the Low CIBIL Score may change the decision of the lender on how he/she/it wants the flexi EMI structure to be!