When an account slips into the NPA, the bank or lender tries to recover their loans by every possible means, including legal means, which involves possession & auction of the underlying securities.
Moreover, the borrower’s business had already suffered, resulting in NPA; above this, bank restrictions like blocking current accounts and the unavailability of further financial support from other financial institutions make the situation worse.
This clearly shows that after NPA, all traditional banks & NBFC do not extend financial support to the borrower. So, all these legal cases, banking restrictions, and suffered business put a deep mental pressure on the borrower, and he feels trapped.
The final solution to come out of this situation is to close the NPA accounts, but the unavailability of standard banking support makes it difficult for borrowers. So, he requires other sources or alternative funding support to deal with NPA.
Here, Alternative Funding Solutions for NPA as well as Stressed Companies with SMA1 & SMA2 Accounts
NPA Loan Takeover
These days, some new-age companies are offering NPA loan takeover facilities. Means, they can directly pay to your previous bank and take over the NPA liability along with the collateral.
This seems to be a good solution as it is offered by some kind of NBFC registered under the RBI, for providing loans. But the advantage is that they provide finance to close NPA accounts. In this way, borrower NPA accounts can be transferred to a new company & client will get rid of all the legal issues while saving their properties from being auctioned by the bank.
The new lender can reschedule the loan by offering a structured repayment plan and a moratorium to provide immediate relief from the financial burden. And, the borrower can re-manage their business operations accounts and can be eligible for a standard banking loan in the future.
Private Finance for NPA Accounts
Private finance or loans through private lenders are always a parallel loan solution. Despite the high borrowing cost & tough documentation, for borrowers, it is more accessible without a lot of compliance. Private finance can be used for:
- Closing an NPA account
- Restructure stressed loan
- Raising funds for business expansion
- Clearing overdues of other loans
- Funding for cases running under DRT & NCLT courts
- Post NPA closure loans
- Constructing Hotels
- Educational institutions where financing is very tough
- Real Estate stalled projects
Benefits of Alternative Finance
- Ideal for NPA borrowers
- Loan without CIBIL considerations
- Finance starting from Rs.1 Crore to 150+
- Standard mortgage of property
- Tenor up to 7 years
- Moratorium option
- Working capital finance
- All India availability
- Funding for corporates with a low company rating
Conclusion
In these modern days, NPA borrowers can also manage their NPA & stressed accounts with the help of alternative funding arrangements. This alternative funding helps in closing stressed accounts directly & takeover an NPA along with all underlying securities. Also, private finance offers parallel financial support for multiple purposes for NPA borrowers.