Factory Land & Building Loans
Factory Land & Building loans are taken for the factory construction. or outright purchase of constructed factory. usually the property is kept with lenders as security & lenders used to offer long term funding as term loans.
The tenure of funding for such acquisitions are 10 years. plus however the borrower can prepay if he intend to do so. These are primarily an expansion plan to achieve the next level of growth.
After completion of the project, the borrower can go for working capital loans also from same lenders to ensure due liquidity for its day to day operations.
It is pertinent to mention that the construction loan. is disbursed in trenches according to the progress of construction. Also to ensure disbursement rationality, the payments are released to contractor directly rather than to the borrower.
Important Features of Factory Land & Building Loans
- The tenure of the loans are higher compared to other loans which helps in building long term business assets.
- It helps in building strong foundation for consistent growth because such investments impact greater comfort in the eyes of lenders & investors.
- These loans are typically assets backed loans so offers risk mitigation tool for fund raising exercise.
- The interest rates are comparatively better from other loans & also support for better negotiations for unsecured loans under working capital requirement.
- Various types of loan choose which is useful for your business.
FAQ for Factory & Building Loans
Is principal amount need to pay during the construction period?
It depends on bank policy & wish of the borrower however usually banks prefer to get at least interest on the principal.
How much is the flexibility in terms?
It depends on gestation period required for construction. & time period required to reach at break-even capacity utilization after initiation. Banks are ready to offer customized solutions after understanding the needs.
How much contribution is required from borrower?
Typically Banks offers up to 60%- 70% funding for purchase of land & 80% to 85% for construction cost of the project.
Once the factory is operational, Banks release the working capital funds & re-assess it to enhance gradually according to the progress.