Are business loan fees refundable?

Most fees, such as processing charges, are non-refundable.

What is the average cost of processing fees for SME Loans?

At L&T Finance, the SME loan processing fee is up to 3% on the sanctioned amount + applicable taxes.

How do SME Loan fees impact my business's cash flow?

High fees increase borrowing costs, affecting your cash flow and reducing funds available for operations.

Can I reduce my loan fees by choosing a secured loan over an unsecured loan?

Yes, secured loans generally have lower processing fees and interest rates than unsecured loans.

Can I negotiate the foreclosure charges for an SME Loan?

You can contact our customer care to know if you can negotiate foreclosure charges.

Is it possible to negotiate business loan fees with lenders?

Yes, you may get a reduced fee with a strong credit score.

Do loan repayment terms impact SMEs' overall fees and charges?

Yes, longer tenures may increase the total interest paid, while shorter tenures could involve higher EMIs but lower overall costs.

How can I avoid unnecessary SME Loan charges during application?

Read the terms carefully, clarify all costs upfront and avoid add-ons unless required.

SME Loan Processing Fee & Services Charges

Processing Fees for SME Loan

SME Loans are essential financial tools for businesses looking to grow, manage cash flow, or invest in opportunities. However, understanding the associated SME loan fees and charges is crucial to avoid surprises that could strain your finances. From the SME loan processing fee to foreclosure charges for MSME, being informed helps you plan and manage costs effectively. As a responsible NBFC, we ensure complete transparency regarding all applicable fees, helping you make sound financial decisions.

What Are SME Loan Fees and Charges?

SME Loan Fees and Charges are all the non-interest costs levied by a lender (like an NBFC) on a Small or Medium Enterprise (SME) borrower over the lifetime of a business loan. These charges, combined with the interest rate, determine the true overall cost of the loan, often referred to as the Annual Percentage Rate (APR).

Fees and Charges for SME Loan

Charge type - Small Medium Enterprise (SME) Term Loan / Drop line / Over Draft (OD)/ Hybrid Over Draft (OD)	Details
Processing Fees	Up to 3% on sanctioned amount + applicable taxes
Asset Valuation & Verification (Term loan) (for Partially Collateralised Business Loan)	Up to 1% of loan amount + applicable taxes
Facilitation Fee* * A facilitation fee is levied on the customer to cover the company’s costs related to facilitating the transaction between the borrower and LTF. It is based on acquisition expenses including digital processing, manpower and other services.	For loans with Sanction up to Rs. 25 lakhs - Up to Rs.5,000/- + applicable taxes For loans with Sanction above Rs. 25 lakhs – Up to Rs.10,000/- + applicable taxes
EMI Dishonour/Bounce Charge* *A bounce charge is a charge for (i) dishonour of any repayment instrument; or (ii) non-payment of instalment(s) on their respective due dates due to dishonour of payment mandate or non-registration of the payment mandate	As shown in the table below
Loan sanction amount (in INR)	Charges in (in INR)
< 5 lacs	₹ 500
5 – 50 Lacs	₹ 1000
>50 Lacs – 2 Cr	₹ 1500
>2 Cr	₹ 2000
Penal Charge/Late Payment Charge (LPC)	Up to 2% per month (p.m.) on overdue EMI + applicable taxes
Part Prepayment Charges (For Term Loan)	Up to 2% on total partprepayment amount + applicable taxes
Part Prepayment Charges (for Dropline Overdraft / Hybrid Overdraft )	Nil, Part - prepayment of Loan will not amount to limit reduction.
Original Title Documents (OTD) late collection charge (Term Loan) (for Partially Collateralised Business Loan)	Rs. 35 per day + applicable taxes
Annual Maintenance Charges (AMC) (For Term Loan)	NIL
Annual Maintenance Charges (AMC) (for Dropline Overdraft)	0.5% + applicable taxes, on the Dropline limit starting on the 13th Instalment and every anniversary thereafter In the event the average utilization of the Dropline Limit Facility, calculated based on daily limit utilization of the Borrower, is less than 50% for the preceding 365 days, then the Lender shall charge the Borrower twice the Annual Maintenance Charges as stipulated in the Schedule
Annual Maintenance Charges (AMC) (for Hybrid Overdraft)	No upfront charges/Zero charges at the time of disbursement for the Hybrid Limit. 0.5% + applicable taxes, on the Hybrid Limit as on the 13th Instalment & every anniversary thereafter In the event the average utilization of the Dropline Limit Facility, calculated based on daily limit utilization of the Borrower, is less than 50% for the preceding 365 days, then the Lender shall charge the Borrower twice the Annual Maintenance Charges as stipulated in the Schedule.
Non-Compliance charges (Term loan) (for Partially Collateralised Business Loan))	Up to 1% p.a. of principal outstanding loan amount _+ applicable taxes
Charges incurred by LTF for initiating action under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002: (Term loan) (for Partially Collateralised Business Loan)	Issue of Loan Recall Notice = Up to Rs. 500/ – Issue of Demand Notice = Up to Rs. 1,000/ – Issue of Possession Notice = Up to Rs. 2,000/ – Applying District Magistrate Order = Up to Rs. 8,000/ - Taking Physical possession. Up to Rs. 20,000/ – Actual cost incurred will be debited for expenses pertaining to Publication of Possession Notice / Publication Demand Notice / Publication of Sale cum Auction Notice. All applicable taxes will be added.
Foreclosure Charges:	After 6 months of disbursement: Up to 5% + applicable taxes on outstanding amount for Term Loan on the date of such foreclosure Prior to 6 months of disbursement: Up to 6% + applicable taxes on outstanding amount for Term Loan on the date of such foreclosure
Repayment instrument Swap Charges (per swap):	Up to Rs.500/- + applicable taxes (applicable only for branch walk-ins)
Document retrieval / Duplicate NOC charges	Nil for digital copy. Charge for paper copy is Up to Rs.1000/- + applicable taxes per statement/letter/certificate.
Legal fees and charges:	As per actuals or Up to Rs. 50,000/- whichever is lower + applicable taxes
Recovery charges:	As per actuals or Up to Rs. 15,000/- whichever is lower + applicable taxes
Field collection service charge:	Up to Rs.500/- per collection + applicable taxes
Auction Fees (Term loan) (for Partially Collateralised Business Loan)	Up to 1% of auction sale amount + applicable taxes

How to Minimise SME Loan Fees and Charges

Reducing the cost of SME loan processing fees and other business loan fees and charges requires careful planning and proactive measures. Here are some tips to help you save:

1. Compare Offers from Multiple Lenders

Use online platforms to compare processing fees, foreclosure charges for MSME, and other costs across different lenders.

2. Negotiate Terms

Approach lenders with a strong credit score and business stability to negotiate reduced fees.

3. Choose Loans with Transparent Terms

Opt for lenders who clearly outline all costs, avoiding SME Loan hidden charges.

4. Repay On Time

Avoid late payment penalties by setting up automated EMI payments.

5. Leverage Collateral

Secured loans generally come with lower fees and charges compared to unsecured loans.

6. Avoid Unnecessary Services

Decline add-on services or insurance plans unless they're essential for your business.

Taking these steps can help you save significantly on your SME Loan fees and manage your cash flow better.

Common SME Loan Hidden Charges to Watch Out For

Beyond the standard SME loan processing fee and foreclosure charges for MSME, borrowers must watch for SME loan hidden charges that inflate the true cost of borrowing.

Key charges often missed include:

Legal & Documentation Fees: Actual costs for property vetting, title checks, and stamp duty, especially for secured loans.
Repayment Swap/Mandate Failure Charges: Penalties (e.g., ₹500) for changing your EMI bank account or failed auto-debit attempts.
Field Collection/Irregularity Charges: Fees incurred if the lender must physically follow up on severely overdue payments.
Physical Document Charges: Fees for requesting physical copies of loan statements or foreclosure certificates after the loan is closed.

Always demand a Key Fact Statement (KFS) upfront, which fully discloses all business loan fees and charges, ensuring complete transparency.

FAQs & Support

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SME Loan foreclosure charges vary based on the loan tenure. For loans foreclosed within 6 months of disbursement, a 10% charge applies. After 6 months, the charge is 5%, both calculated on the outstanding loan amount, plus applicable taxes.

Yes, for early partial repayment (Part Prepayment) for a Term Loan, a charge of 2% plus applicable taxes applies on the pre-payment amount after 6 months from disbursement. For complete early closure (Foreclosure), charges are 5% or 10% depending on the tenure.