When the cash flow of business does not match with loan repayment schedule, it becomes difficult for business to repay the loan on time. In such situations, refinance of existing loans by takeover for higher tenure (10-15 yrs) with lower rate of interest is lucrative option. It will help the business to reduce obligation of repayment of loan, without affecting credibility.
For example: Current outstanding of the loan is Rs.12 crores, to be repaid in next 3 years i.e. Repayment obligation is Rs.4 cr per year plus interest. Refinance by new institution for 12 years with lower interest, will give new obligation of Rs.1 crores per year plus interest. Time required for such loan transfer is 15- 20 working days.
If the business has many loans going on (Project loans / Unsecured Loans /Machinery Loans) of different amounts and different tenures, consolidation of all these loans in one loan for easy repayment, reduced obligation and possibly making some properties free, is the lucrative option. Also, with such consolidation, business will save on interest cost. Time required for such loan consolidation is 15-30 working days.