Term Loan

 

Every business has numerous financial needs. Be it for starting a company, expanding a company, purchasing machinery, or any other needs, money is the primary requirement. Though there are a number of different loans available in the market, a term loan is the most straightforward, easy, and simple type of financial support.

What is a Term Loan?

As the name suggests, a term loan definition refers to a loan that is obtained for a fixed term. This can be for a short term, medium term, or even a long term as per the various business needs of the company. They may be for equipment, real estate, or even working capital. Term loan for business has fixed EMIs, a fixed amount and a fixed term. Usually, the rate of interest is also fixed. However, in certain cases, you may be able to obtain a floating interest rate as well.

Features of Term Loan

Here are some of the features of a term loan – 

  • As this is a debt financing, the banks or financial institutions lending money to the company are simply creditors and do not own any of the company.
  • The term loans can be obtained as secured loans or unsecured loans depending on different factors as well as the lending institution. 
  • The returns along with the interest must be paid back even in case the company does not have profits. 
  • Term loans are a cheap and easy source of funds for a company. 
  • Assets that are acquired through a term loan act as the primary security and the rest of the company assets serve as collateral security.

Types of Term Loan

There are generally 3 types of term loans depending on the duration of the loan. They are – 

  • Short-term: These are loans in which the term is generally short. In most cases, it is around 1-2 years. 
  • Medium-term: These are loans that are normally granted for terms of 2-5 years. 
  • Long-term: These are the term loans that are taken for long periods of time, i.e more than 5 years. 

Term Loan Eligibility

Being the simplest types of loans, these usually come with limited eligibility criteria. However, based on the term and the lending financial institution or bank, there may be additional eligibility requirements. The basic requirements are mentioned below – 

  • You must have a good credit score. The factors of your loan agreement will largely depend on this. 
  •  You may or may not need collateral depending on the lending institution and your decision to mortgage the property. The loans will be available in both the secured and unsecured types.
  • Your company will need to have a sound financial background. 

Term Loan Rate of Interest

Normally there are 2 ways in which the term loan interest rates are availed – 

  • Fixed term loan rate of interest  – In this type, there is a fixed percentage rate for the interest throughout the entire tenure. 
  • Floating interest rate – In this category, the rate of interest throughout the period will vary according to the market fluctuations. 

How does Term Loan work?

Term loans work in a similar way to other loan types. Be it a term loan for machinery, term loan for working capital, or any other, the process is similar. When you avail a term loan, you will receive the amount for a fixed tenure. Based on your credit score, amount, and other factors, your interest will be decided. You will then have to pay back the loan according to the EMIs.

Advantages – 

  • The term loans end up being cheaper and affordable to the borrower.
  • The interest paid on the term loan is tax-deductible and as a result, the tax benefits can be availed.
  • The term loans terms are negotiable.
  • The term loans are a form of debt financing, and as a result, the interest of the equity shareholder is not affected.
  • They are available in different forms that suit your needs. 
  • You can find out the exact amount you will be paying throughout the period, during your application process itself. This helps in cost management. 
  • Minimal documentation.

Documents Required

The following are the documents you will require in order to apply for a term loan. However, based on the lending institution you may have to provide additional documents as well.

  • KYC documents - Adhar card, PAN card, etc.
  • Bank statements proving sound financial status.
  • ITR forms.
  • Proof of business registration.
  • Business profile.
  • Company balance sheets.

Term Loan at Terkar Capital

Terkar capital is one of the top financial institutions syndicating and arranging term loans in Pune. We provide you with the best ROI in the market. With our thorough assistance and guidance, we help you choose the right repayment structure and suggest you with the type of the loan you should go for. That’s not it! Our services ensure that you can get the term loan not just in Indian Rupees, but in other international currencies as well.

For More Details Please contact our Experts

For inquiries kindly fill the form and our representative will soon get  back to you. 

  8308629820 / 8262831330
  yes@terkarcapital.com