School finance has its own features & different nature than other loan products. Schools have unique nature of functioning. It receives maximum income during period of admissions, i.e in June to September in a year or fees is received in instalments throughout the year. So the loan repayment for schools has to be in accordance with the pattern of its fees receipts. It will help schools to maintain cash flow throughout the year and repay the loan easily & on timely basis.
1) Fresh term loan for Schools : Fresh loan for school can be availed for -
This loan is generally secured against the Collateral security of property, owned by Promoter trust or society & can be sanctioned - disbursed within a span of 20-30 working days.
2) Loan Transfer from Existing Banker :
a) Refinancing of existing loan to reduce obligation : When the cash flow of school , does not match with repayment schedule, it becomes difficult for them to repay the loan on time. In such situations, takeover of existing loan and arranging new loan with higher tenure (10-12 yrs) is the best solution. It will help schools to reduce obligation for repayment of loan, without affecting its credibility. For example: Current outstanding of the loan is Rs. 6 crores, to be repaid in next 3 years i.e. Repayment obligation is Rs.2 cr per year plus interest. After refinance from financial institution for 10 years, new obligation will be Rs. 0.6 crores per year plus interest. Time required for such loan transfer is 20-30 working days.
b) Consolidation of many loans in to one loan: If the school is servicing many loans at a time (Project loan, Bus loans, unsecured loans etc) & cashflow is streched, then consolidation of all these loans in one loan for easy & lower EMI is inevitable. Time required for such loan consolidation is 20-30 working days.
c) Release of Promoter Properties from existing bankers: During initial stages of school operation, along with school property, promoters normally mortgage their personal assets to bank for availing school loan. But when school becomes self suffient ,promoters personal properties can be released. Loan transfer in such cases, can help schools to release promoters personals properties.
d) Top up on existing school loan:: Sometimes, existing banker does not support the school for requirement of extra funds. In such situation, school can look for the transfer of existing loan to new financier, with top up amount on existing loan and without giving additional security (Provided security value is adequate)
3) Unsecured loans for schools:
Unsecured loan for schools are the loans availed without giving any property collateral. These loans are available from Rs.10 lacs to Rs. 50 lacs and is sanctioned based on financial strength reflected in balance sheet of the school .These funds can be used for any purpose of the school & is available for only those schools which has minimum stability of 3 years & have strong financials. Time required to arrange such unsecured loans is 3-10 working days. Being unsecured, interest rates for such loans are little higher than secured loans & repayment period is 2-3 years.
4) Loan against Leased School Property:
Many schools are run on franchisee based model. In this model, there are two ways – in one model, owner of the property, lease out school property to a branded school and gets rental income per month. School is operated by the brands like Podar school model. In other model, property is owned by promoter and school is also run by promoter. In return, promoter shares franchise fees every year with the brand, like delhi public school model. In both the cases, finance for promoters can be arranges. Time required in such proposals is 10-15 working days.
5) Bus Loan for schools & Colleges :
Buses are integral part of school operations, especially when school is located outside the city or town limit. Many schools avail oan for buses for purchase,typically for 3 to 5 years.