Financial instruments such as loans has made our lives so much easier in the last decade. A loan makes it possible for us to achieve our dreams, be it purchasing your dream car or a house. Banks have launched new loan schemes over the years to suit the financial needs of its customers and one such loan is loan for commercial shop purchases. This loan offers finances to an individual who wants to purchase a commercial property to set up their shop or business.
State Bank of India (SBI) offers a loan scheme for present and prospective owners of shops or offices or show-rooms or service centres to avail a loan for the purchase of shop premises or furniture or modernization of existing premises. State Bank of India is India’s largest bank with over 200 years of history with the highest amount of assets, deposits, profits, branches, customers and employees. SBI is the only Indian Bank to be featured in Fortune Global 500 list of companies in 2011 and is ranked 61st in the list of Top 1000 Banks in the World by ‘The Banker’ as on July 2011.
Difference between loans for residential property purchase and commercial shop purchase
- LTV ratio– LTV ratio or loan-to-value ratio describes the ratio of the loan to the value of the property purchased. While for residential properties, the LTV ratio is around 75-85%, for commercial properties, the ratio is much lesser at 55%.
- Rate of interest- The rate of interest is higher for commercial property loans when compared to residential property loans.
- Loan tenure– The maximum loan tenure for commercial properties is usually restricted to 10 years while the loan tenure offered for residential properties can go up to 25-30 years.
- Processing fee– The processing fee charged for commercial property loans is much higher when compared to the processing fee for residential property loans. The usual processing fee for residential property loans is capped at Rs.10,000 while the standard processing fee for commercial loans is 1% of the loan amount.
Eligibility
A person can avail the SBI loan for setting up of shop or office in present and prospective owners of shops, offices, showrooms, training centres, service centres, garages, Chartered Accountants, Company Secretaries, Consultants and other professionals. The scheme can also be extended for services such as travel agencies, caterers, hotels, eateries, beauty salons, etc. The applicant could be an individual, firm, partnership, trust, franchisee, company or LLP.
The purpose of using the loan amount for the following purposes:
• Purchase of new/old shops/establishments/offices.
• Modernization/expansion of establishments/shops, etc.
• All furniture/fixtures, electrical fittings and other accessories required for shops/showrooms/offices.
Nature of Loan
The SBI provides loan for shops and offices as a term loan for a quantum of upto Rs.20 lakhs. Promoters require to contribute margin of upto 25%, in case of purchase of new property and margin of upto 40% in case of purchase of the old property. The interest rate for the loan is floating based on the Base rate of the Bank. A person can avail the repayment tenure of upto 7 years including moratorium period of 6 months under the scheme. The asset purchased must be pledged to the bank under hypothecation/pledge/mortgage/assignment of the assets. Further, all assets for the loan must insure for the full value of the loan until repayment.
FAQs
Loans for purchase of Commercial Shops/Properties in India
It can be very hard to get a commercial loan if you have a poor credit score. If you have a good score and a credit history, you can easily get a commercial loan.
How are figures for commercial loan rates determined?
The loan issuing authority will look into your personal credit rating and also the rating of your business. This will affect the interest rate on your commercial loan and also the term of theloan.