Today's parents know that sending their kids to school isn't enough, and they believe more in state-of-the-art institutions and closely examine the school's infrastructure before admitting their children. All of us want the growth and development of our little ones, and we won't hesitate to pay the price for the same. Now, don't you look upon the same as a business opportunity?
We all know how much a well-established school earns, but dreaming of the same seems tough to many. The infrastructure is so costly, and the rest of the expenses are also large. With today's variety of loan products, you can expect a loan from NBFCs and banks for educational institutions. Individuals and organisations can avail special loans for schools instead of going with mainstream business loans.
Did you know?
India holds the world’s largest school-going population, estimating over 200 million. Private schools form one-fourth of the total number of K-12 schools in India. Out of 253 million students going to K-12 schools, 153.5 million (60%) go to public schools.
Benefits of School Loan Finance
Banks can provide loans for private schools construction or even renovate the existing schools to increase education infrastructure. Also, the base amount of a typical bank will be a minimum of ₹50 lacs for school loans. With this amount, schools and learning institutions can:
Facilitate Sports: through private schools loans, higher equipment for sports and facilities are available. It can help continue more physical education for students, and it's an integral part of their educational journey.
Enhance connectivity: Better campus connectivity can be achieved by refinancing school loans. Faculty and teachers can communicate and relay information more quickly and precisely.
Construct new buildings: A loan to build a school can assist in creating new rooms and wings, which will improve the atmosphere for learning. The laboratory, classroom and library renovations could be completed in just a few days.
Also, be sure to manage the salary distribution of the teachers, cleaners, etc., of your school.
Also Read: Ways To Start A Successful School
How Can I Apply for a Loan for Schools?
You can go to the closest bank branch of the company you intend to obtain the loan from and inquire about the process for applying. It is necessary to get an application form and fill it in, and then submit your application to the lending institution. After the lender verifies your information, they will decide whether or not to approve the application.
If approved, the loan amount will be paid out within some days. If you prefer, visit the official site for the lending institution and submit your contact information so that management can call you back and guide the application process to you.
Considerations to Make When Getting the Loan
Many Indian banks provide loans to schools to grow and offer more opportunities for students. Every lender has a set of guidelines and eligibility criteria regarding the maximum amount of loan and how it will be paid back.
You must be familiar with the procedure and keep all the vital documents on hand when you apply to borrow the money. You can contact the bank to know everything in detail. Borrowing a loan for school is undoubtedly a big task that you can't do without the right documentation. Here are the vital ones:
- Three years financials, if available, or at least one year of financial
- Last 12 months bank statements, where fees are deposited.
- Current loan sanctions letters & loan statements, if any.
- PAN copy, Registration & Deed for trust or society, as applicable.
- Main trustees’/Promoters’ PAN & Aadhar.
- Property documents.
- School permissions as applicable.
- Class-wise student strength and fees for the last three years in excel format.
Loans Available for Schools
Unsecured Loans for Schools
Loans that are availed without giving any property collateral are called unsecured loans for schools, and you can conveniently avail them without needing to give property collateral. These loans range from ₹10 lacs to ₹50 lacs.
You need to submit your school's balance sheet based on your financial strength. The bank determines the loan’s amount. Your school's stability period should be a minimum of 3 years considering eligibility and you should have strong financials. Once your unsecured school loan is passed (which takes roughly 3-10 working days), you're free to use the funds in any task related to school. It can be:
- Adding extra facilities
- Building construction
- Remodelling/interiors
- Construction of playground
- Hiring school staff
- Providing transportation facilities to students
In short, you're free to use the funds for the welfare of the school the way you want.
Loan Against a Private School Building
A private school building operates on a franchisee-based model. In this model, there are two options. In one model, the property owner can lease out the property to a brand-name school and receive a monthly rental payment.
Brands manage the school. In another model, the property is owned by promoters, and the promoter runs school management. The promoter can share franchise fees each year in conjunction with the name, just like in a public school model in Delhi. Also, in both cases, finance for promoters may be made available. Ten working days are enough for completing such procedures.
School Bus Loans for Schools
Buses play an essential role in school operations, especially if the schools are outside the town or city limits. Numerous schools purchase the buses through loans, typically 3-5 years.
Loan Transfer From Existing Banker
Refinancing of existing loan: When your school's cash flow doesn't match your loan repayment schedule, repaying the loan within deadlines proves too challenging. In solution to that, you can find a bank that provides you longer tenure to repay the loan and transfer your school loan from the existing bank to this new one. You will have less stress as you've got a long time to repay the loan now. Most importantly, you'll save on bank penalties as well.
Consolidating multiple loans into one: Sometimes, a school services multiple loans, for example, unsecured loans, Project loans, Bus loans, business loans, etc. The EMI may reach an intolerable level. The best solution in such conditions is to merge all loans into one. We call it loan consolidation, and it takes 20-30 days to complete the process. Your EMIs will be surprisingly low.
Releasing promoter properties from your existing bank: You must mortgage your assets to the bank that avails the school loan when you are freshly opening the school. Later on, if your school consistently generates enough business, you can transfer your loan to another bank. This way, you can release your personal properties from the existing bank.
Top up: A few banks don't support you in meeting school-related requirements by adding extra funds to your loan. Again, transferring the existing school loan to some new financier is a smart idea. The new bank will add a top-up amount to your existing loan without demanding extra security.
Which Banks Provide School Loans in India?
Baroda Vidyasthali Loan
Bank of Baroda provides loans for school construction and funds renovations, repairs, or upgrades for existing ones. The maximum loan amount will be ₹25 lacs, and the school owner or potential owner must provide complete project plans and costs to the lender.
The bank will only approve 75% of the project's total cost, which can be considered credit subject to a maximum of ₹25 lacs. The loan will require the collateral of property and hypothecation to the purpose for which you’ll take the loan.
Also Read: Guide To Starting A Coaching Centre
ICICI Bank Loan
ICICI Bank is another Indian Institution that offers loans to colleges and schools. The loan can establish new businesses or enhance, expand, or remodel existing ones. The interest rate or EMI, the loan length and repayment methods will differ according to the type of loan you choose and the amount you'll need.
Varthana Secured and Unsecured Loans
Another source of loans for schools is Varthana secured and unsecured loans. The loans are provided by Varthana, the NBFC, which operates in the educational and financial sectors. These loans are collateral-free.
Conclusion
Setting up and running a business is easy if you've already got experience. Funding won't hinder the path, as you can already get heavy funding in bank loans. It's time to check which type of bank loan for school suits you, and you can decide the procedure to open a school in India. Also, no matter which EMI you select, repaying the loan is crucial on time to avoid extra charges.
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