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Types of Commercial Loan That SMEs Can Obtain in India

When your little dreamy idea starts taking a real shape, you realise that it’s high time that you begin garnering your finances to make it grow. At a certain time, when efforts fall short, that’s where you need to fill for business loans. Business loans or commercial loan can help your business with uninterrupted capital supply so that your venture can take off to touch the pinnacle of success. 

Any business owner can employ business loans to buy commercial building or business premises for new or established institutions, both. Also, you can use the funding to purchase any business asset or fuelling the expansion of any of your business establishment. So, let us understand what business loan is. 

What is a Commercial or Business Loan?

A business loan is generally a short-term finance. Majorly seeding companies avail this fund to supply financial support to their business that covers capital expenditures and unexpected operation costs. During the shaping stage of a business, a business owner seems to encounter various opportunities when he/she gets the possibility for inorganic growth. 

However, pursuing those opportunities would require a considerable amount of capital. Besides, a growing venture demands several expenses, as well. In this scenario, a business loan can be an all-embracing economical source that would considerably strengthen your business.

Types of Commercial Loans:

A commercial loan is the most prominent way of funding business projects. While lending you the business funds, the loan lender will look at your complete general information, such as your income, existing debts, etc. Your application will be reviewed by a loan officer, depending upon the information. 

Different business loan lenders have distinctive modes of processing the fund. You can commence with pre-qualifying for financial loans. It will determine as a borrower how much business fund you can afford and which business loans programme will suit you the best.

Bank Overdraft Facility – 

This loan type is usually considered to be a short-term loan. Or, it’s more like a source of transitory funding that one can possibly payback in the consequent deposit. This convenient facility allows commercial enterprises to withdraw more inclusive capitals than what is obtainable in the account or company.

Letter of Credit –

It’s generally a document that financing institutions provide to the trading party or client who resides in a foreign country. The paper gets issued to the trader on the condition that the borrower or the commercial institution presents specific documents confirming that amounts will be executed conforming to the delivery of goods.

SME Collateral Free Loan – 

This loan is offered to SMEs and is completely collateral-free. However, only seeding companies or start-up enterprises can avail of this loan. Meanwhile, small retailers are not eligible for SME Collateral Free Loan. 

SME Credit Card –

Being a business owner, you can obtain this loan as cash credit or probably as a term loan up to a sum of 10 lakhs. Cash credit loans can be paid back in 10 years. SME credit card loans are commonly offered to smaller-scale businesses, small retailers, transport businesses and other small industries. 


There are other types of commercial loan available for small-scale business owners that include Term loans, Construction Equipment Loan, Commercial Vehicle Loans, Lease Finance, Bank Guarantee, etc. You can choose the loan type depending on your funding requirements for your business. 

Hero FinCorp is a diversified financial services provider in India. We are an associate company of Hero MotoCorp Ltd. Hero FinCorp Limited (HFCL) was incorporated in December 1991 as Hero Honda FinLease Limited. After the restructuring of our parent company Hero MotoCorp Limited (formerly Hero Honda Motors Limited), HFCL also changed its name to Hero FinCorp Limited in July, 2011.
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