Education Institute funding has its own features & different nature than funding to other businesses because of its unique nature of functioning. Most of the education institutes are run under the umbrella of a society or trust registered as the legal entity. So the loan is borrowed in the name of the society or a trust & not in the institute name. Nature of cash flow in the education business is also not uniform throughout the year. Institutes receive maximum income (Fees) during the period of admissions (June to September) & remaining fees are received in instalments throughout the year. So the loan repayment for Institutes has to be in accordance with the pattern of fees receipts. It will help the Institute to maintain cash flow throughout the year and repay the loan easily & on a timely basis.
1) Fresh term loan for Institutes against collateral: -
It can be availed by the education trust, society or section 25 company running professional education institutes & schools since the last 3 years. It can be availed for various purposes like Purchase for Plot for the institute, Building construction, Renovation of old college building, purchasing books, furniture, IT assets, Equipments etc. This loan is generally secured against the Collateral security owned by Promoter, trust or society & can be sanctioned - disbursed within a span of 15-30 working days.
2) Loan Transfer from Existing Bank (Refinance & Top Up) :
Loan transfer is done for various purposes as below :
a) Refinancing to reduce obligation : Sometimes, existing bankers does not support education institutes for requirement of extra funds. In such a situation, institutes can look to transfer existing loans to new financiers, with a top-up amount on the existing loan, without giving additional security (existing security value is adequate) This top-up loan can be used for working capital, plot purchase, construction, other purchases etc.
b) Top up on existing 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 operations, promoters normally mortgage their personal assets to bank for availing institute loan. But when the institute becomes self-sufficient ,promoters' personal properties can be released. Loan transfer in such cases, can help to release promoters personals properties.
3) Loan against Leased School Property:
Many schools are run on franchisee based models. In this model, there are two ways – in one model, the owner of the property leases out school property to a branded school and gets rental income per month. School is operated by brands like the Podar school model. In other models, property is owned by the promoter and school is also run by the promoter. In return, the promoter shares franchise fees every year with the brand, like Delhi public school model. In both the cases, finance for promoters can be arranged. Time required in such proposals is 10-15 working days.
4) Loan against New or used buses:
Buses are an integral part of school & institute operations, especially when it is located outside the city limit. These assets can be utilised to raise loan, to be used as working capital for institutes.