The factors which you need to consider while availing a commercial loan include interest rates, additional charges, and the term of the loan We have often heard about home loans, car loans, and personal loans. Most of us also know the purpose which these loans serve. However, only a few of us would be aware of commercial loans. Let’s try to understand the purpose of these loans, documentation process and who can avail them. Commercial vehicle loans are usually taken by the individual, partnership firms, proprietorship firms, HUF (Hindu Undivided Family), trusts, societies, self-employed, businessmen and private and public limited companies for their financing needs for owning and running commercial vehicles even for the purpose of an international moving company. The borrowers of these loans are usually engaged in the business of transportation. Commercial vehicle loan options are available for buses, tippers, transit mixers or any other heavy, light or small commercial vehicle. A commercial vehicle loan can be taken for a variety of commercial vehicles, which may be used at different locations. Banks such as HDFC Bank, ICICI Bank, DCB Bank and Yes Bank among others provide such loans. Also, NBFCs (non-banking financial companies) like Reliance Commercial Finance and Fullerton India provide loans. While loans are sanctioned for the purchase of a new commercial vehicle, banks also offer loans for pre-owned vehicles. Borrowers can also learn more and  avail of a top up on existing loans subject to conditions. Loan process The borrower—who wants to avail of a commercial vehicle loan—has to fill in the application form and provide the necessary documents. The documents include proof of address (passport, ration card, voters ID), proof of experience in the relevant area, track record of past loans (if availed) and six months bank statements of the last six months. The borrowers would also need to submit two years income tax returns, audited balance sheets and profit & loss account statements. List of owned vehicles along with the copies of RC (registration certificate) books. Some banks may also ask for transportation contracts for a higher quantum of funding. In some cases, banks may ask also for a personal guarantor. Who can avail of a loan? Loans can be applied by individuals and by co-applicants, partners in partnership firms and directors in private limited companies can apply for a joint loan. In case of individuals, blood relatives can avail of a joint loan. The minimum loan amount which can be availed by for small players is Rs. 1 lakh, while the same for large corporate is up to Rs. 5 crore. Approval process The loan is generally approved within seven days of submission of required documents to the bank. However, the time taken to sanction the loan may vary depending upon the nature of the loan, quantum of funding and location. Normally, the bank / financial institution disburses the loan directly to the vehicle dealer and not to the borrower. Loan amount & tenure The loan amount can vary depending upon the specific requirement. Funding can extend to 100% of the chassis, body funding can be extended on the special requirement and on the past experiences. Chassis basically means the internal structure of a vehicle like an engine, transmission, driveshaft, differential, and suspension. The tenure of the loan can range from six months to sixty months. Interest rates The interest rates range from 10% to 15% depending on the customer and vehicle segment. The customer segment comprises self-employed, corporate, businessmen and partnership firms, while vehicle segment includes various vehicles such as trucks, buses, cars, etc. The rate depends on a lot of factors such as the number of vehicles owned by the borrower, his business turnover, repayment track record from other financiers (if any), etc. The financial institutions are able to confirm the rate of interest once they have studied the documents. The interest rate may be fixed or variable. What are the processing charges? The charges include processing fee, stamp duty, and vehicle valuation charges. The processing fee depends on the loan amount. It usually ranges from 2%-4%. The processing fee is non-refundable. Stamp duty is normally 2% for a loan amount of Rs. 5 lakh, 3% over Rs. 5 lakh and 4% beyond Rs. 10 lakh. Repayment You need to make monthly payments to the lender to repay your loan. The monthly installment comprises of principal and interest calculated on the basis of the rate of interest mentioned in the loan agreement. In case, you wish to prepay your loan, a penalty of 2% of the outstanding loan amount is levied. To wrap up, the factors which you need to consider while availing a commercial loan include interest rates, additional charges, documents required and the term of the loan.