Schools that have good records of diligent scholars and qualified staff consistently get enquiries for admissions. However, it is not wise to keep enlarging the batches in classrooms, since an imbalanced student-to-teacher ratio is known to affect the quality of education.
The right approach then is to expand the scope of the school – add more sections to classes that have bigger groups of students and hire more teachers to make tutoring effective. Once the plans for expansion begin to look reasonable, the next step for school owners and administrators is to think in terms of funds for such growth.
Fortunately, school loans for established institutions are readily available from a host of authentic lenders. Beyond banks, conventional non-banking financial companies (NBFCs) and privately operating money lenders, there are digital NBFCs that have paved a smoother way to school finance in India.
School authorities will certainly have several questions before they choose the best source of funds to materialise their expansion plans. The most common ones are answered here:
Can We Just Send an Online Application and Avoid Visiting the Lender’s Office?
There is no doubt that school managers are busy. Many of them have a six-day week and on Sundays too, they may need to oversee some maintenance works in the vacant campus or pursue administrative work. It may not be feasible to make multiple trips to offices for loans. While the basic enquiries for loans can be sent online or made through phone calls to lending institutions today, the FinTech companies have a fully digital process of applying for school loans and other credit products. This makes such institutions an attractive option for busy managers.
The request for the loan can be sent online along with the soft copies of the necessary documents. If the applicant school meets the loan criteria – the details of which can be obtained from the official website of the lender – the request for the fund is approved in minutes. Furthermore, the credit criteria are customised, and if one or more conditions remain unfulfilled, the school can talk to the FinTech company’s customer service team to determine if they qualify for the school loan.
What Documents Should We Submit with the Application?
Banks usually ask for the hard copies of supporting documents to be submitted in their offices along with the loan application. On the other hand, since the procedure for procuring finance from a FinTech company takes place online, only the digital versions of the few essential documents need to be uploaded.
Usually, the institutional lenders ask for the following copies:
- Bank statement with at least one year of transaction history
- Financial statements of the school for a minimum of two years
- ‘Know your customer’ (KYC) records of the promoters or trustees of the school
- Fee structure for students in various standards
- Salary structure for the staff
Such documents give a sufficient overview of the schools’ ability to pay back the loan amount. This list, however, is not exhaustive. A public-sector bank, if chosen for the school funding, may ask for more documents.
Once Our Loan Request Stands Approved, How Long will It Take Before We Receive the Funds?
Loan applicants often complain about the long road to the actual receipt of funds in their bank accounts. From sending the application and different documents to negotiating the amount that is actually approved for the loan, it can take more than a month before the funds reach the applicant. Such delay can cost heavily to the schools that need to go ahead with their expansion plans before beginning the new academic session.
FinTech organisations have made things much easier in this regard. Once the application for your school loan is approved (and that is a matter of minutes), it takes only up to 72 hours before the requested amount is credited to your bank account.
Do We Need to Hypothecate Any Collateral for the Loan?
The answer to this question becomes a major deciding factor for most business borrowers when they need to choose from alternative sources of funds. For years, banks and traditional NBFCs have been offering only secured loans. This implies that they ask for a high-value collateral to be pledged to them till the loan amount is fully paid off. For example, if a bank provides a car loan, the car can be freely used by its buyer (owner) from day 1, but it gets hypothecated to the bank till the owner clears the debt through EMIs or bulk payment. The same holds true for business credit, including school loans, provided by the banks.
FinTech companies are largely appreciated for the unsecured nature of the loans offered by them. There is no need to mortgage any asset such as school building or vehicles owned by the school to these digitally active lenders. Funds are provided purely on the basis of the borrower’s creditworthiness. The borrowing school has full rights to liquidate any of its assets if it wants to pay off the loan early.
What will be the Prepayment Charges If We Manage to Pay Off the Loan Earlier than the Determined Schedule?
Private and public sector banks prefer to get their loan amount back through EMIs over an extended period. If the borrower pays back early, a prepayment penalty is levied on them to make up for the loss of interest that would arise from terminated EMIs.
There are no prepayment charges after a specified time when a school funding is procured through a genuine FinTech company. As a business borrower, you can choose to pay through pre-calculated EMIs for the full tenure of the loan, and you also have the option to change your instalment amounts or pay off the outstanding amount of your debt in one go. You can get in touch with the representatives of these lending companies for more details.
What Other Costs Should We be Prepared to Pay in Addition to the Interest on Our Loan?
This is another area where FinTechs are endearing to business loan seekers. Unlike bank loans that come with a loan insurance fee to safeguard the organisation against payment delays/defaults, the loans offered by FinTech lenders are free from hidden charges. The interest and a small processing fee of up to two percent make the total cost of funds.
With the answers to these commonly asked questions at hand, you will now be able to take the right decision on the loan that you need to fuel your school’s expansion plan.