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What is an emergency working capital loan?
The government of India recently launched a financing program to assist small business owners during this unprecedented economic shutdown, caused by the Coronavirus. This new loan program aims to assist qualifying businesses carry out their normal business operations during these difficult times.
Emergency working capital loan is a good alternative to EMI Moratorium, as cost savings on interest can be upto 90%.
- A business must not have an annual turnover of more than ₹100 Cr.
- A business must have an outstanding gross loan less than ₹25 Cr.
- Not more than 2 EMIs must be pending.
If the eligibility criteria is satisfied, a business owner can avail a loan for 20% of the outstanding loan amount at maximum 12% interest rate for 4 years.
To understand more on how coronavirus has affected bank policies with respect to loans, and how this has affected different truck segments and the trucking business in general, refer to the following link:
Why is this beneficial?
- For the first 12 months, only interest needs to be paid. The principal amount can be paid later.
- To avail an emergency working capital loan, not much documentation is required.
- There is no penalty or processing fee in case you want to stop the loan in between.
When can the loan not be availed?
- In case your vehicle is a non-performing asset (NPA), the loan can’t be availed. For example, if your vehicle is held by authorities for any law violations, you can’t avail a loan on its EMI.
It is important to note here, if you want to avail emergency working capital loan from a different bank, you have to get a no-objection certificate (NOC) signed by your primary bank.
To learn more about how you can save costs upto 90% on your moratorium interest using emergency working capital loans, stay tuned for future articles.
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