Loan Basics. Special loans for women entrepreneurs

To woo women entrepreneurs, financial institutions often offer special products. One such product is the special business loan for women offered by some public sector banks. State Bank of India’s (SBI) Stree Shakti Package and Central Bank of India’s Cent-Kalyani are among the few available in the market.

Getting this special category loan can save money for women entrepreneurs. The major cost saving will come in the form of a concession offered on the interest rate front. The interest rate is lower by 0.25 to 1 percentage point when compared to the general business loans offered by these institutions. For instance, Oriental Bank of Commerce charges 10.7 per cent interest rate to women entrepreneurs under the Small and Medium Enterprise scheme for loans above ₹2 lakh and up to ₹25 lakh. This interest rate charged is 1.25 percentage points less than the 11.95 per cent charged for a normal loan. Similarly, SBI offers 0.5 percentage point lower interest rate under its Stree Shakthi Package for loans above ₹2 lakh.

Other cost savings come in the form of processing fee waiver as in the case of Union Bank of India’s Union Nari Shakti scheme. On the other hand, some banks, like Central Bank of India, levy a processing fee of ₹250 per lakh if the loan amount exceeds ₹5 lakh. In normal cases, banks charge 0.5 per cent of the loan amount as the processing fee, immaterial of the quantum of loan taken.

Businesses run by women should meet certain criteria to be eligible to get this special product. For example, Union Bank of India requires the business to be owned and managed by women. In case of partnership, a majority of the partners should be women. Similarly, in order to avail loan under SBI’s Stree Shakti Package, more than 50 per cent of the share capital should be held by women.

In the case of a special loan, providing a margin or a security as collateral is mandatory, but with some relaxations. Some banks like SBI does not require any security for loans up to ₹5 lakh. But others requires a margin amount as collateral or security for getting the loan. For instance, Tamilnad Mercantile Bank needs 20 per cent margin for loans above ₹25,000. The margin requirement in case of Union Bank of India is 5 per cent for loans upto ₹10 lakh and 15 per cent for loans above ₹10 lakh. The company’s assets can be hypothecated in these cases as a security for availing the loan.

According to experts, there is low level of awareness in the market about this special product for women. Vikas Kumar, Co-founder, Loantap, says that banks do not market them much and do not offer them unless explicitly asked for. Secondly, no private bank or non-banking financial company (NBFC) offers similar products. “If business loan for women is classified as a priority sector, then the private institutions may be forced to offer them and also push such products,” adds Vikas.

In some cases, these special loans may not be available. “Taking a business loan would become difficult if the business is less than three years old,” says Rishi Mehra, CEO, Wishfin.com. “In such cases, one can consider taking a loan against property or loan against gold.”

But in these other options you may have to shell out more money as the interest rates and other charges would be higher when compared to the special products.

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