Term Loan for Business
Loans is necessary for all commercial companies' formation, operation, development, and improvement. Any business will almost certainly necessitate a significant financial investment, and the promoter or entrepreneur must secure funding from a qualified lender.
Indeed, loans are the backbone of the lending environment Most company loans are one-time reasons and are returned within a mutually agreed-upon time frame. These loans are "term loans," with limited duration.
What Is A Term Loan?
A term loan is a commercial credit that has fixed repayment conditions, such as a predetermined loan period and interest rate. Borrowers must repay the loan in regular monthly installments, or EMIs until the debt matures.
Want to calculate a sample loan? Try our EMI calculator >
EMIs consist of two primary components: the principal amount and the interest, calculated using the effective interest rate
How Does A Term Loan Work?
Due to various factors, such as a predetermined loan amount and payback schedule, and low-interest rates, these loans are one of the most efficient types of loans available to businesses. A term loan has five components: the loan amount, the interest rate, the loan period, the repayment schedule, and whether the loan is collateral free or not.
This loan has a fixed repayment value. The type of loan chosen and the borrower's eligibility defines the amount of the loan. These company loans come with fixed or variable interest rates. Whichever rate the borrower chooses is entirely up to the borrower. Across the loan period, the firm must return the loan amount in EMIs according to the set repayment plan.
Term Loan Example: Retail
Working Capital Loans: Businesses that want immediate funding to sustain cash flow or pay day-to-day company expenses choose working capital loans. Working capital loans are typically referred to as "short-term loans," as the return period is 12 months after loan disbursement
Overdraft: It is another type of loan in which the financial institution establishes a credit limit based on the requirement and charges interest on the amount utilized rather than on the entire given withdrawal limit. The payback period might be as little as one month or as long as twelve months. Each year, the borrower must renew the limit with the lender.
Equipment Financing: Businesses and companies can use this sort of loan to finance equipment or vehicles used for a variety of activities, including agriculture, farming, commercial transportation, and building. The equipment finance loan amount can range between Rs. 1 lakh and Rs. 10 crores. The individual's background and business type determine the rate of interest.
The Benefits of FlexiLoans Term Loanss
Less Interest Rates
When taken out for a more extended period, term loans provide cheaper interest rates than those with a shorter term. Additionally, interest rates do not fluctuate over the life of the loan.
Term loans provide significant flexibility. There is much room for negotiation on everything from the period to the principal and interest rate. The higher your business's credit score, the more leeway you have with loan conditions.
Improves Cash Flow
When a firm obtains a term loan, it effectively frees up cash flow for other purposes, as the loan amount covers the funding requirements for large capital expenditures. For example, a business can obtain a term loan to finance a recruiting round. This will protect the expenditures associated with the time required to educate employees before they can begin contributing to the bottom line.
Generally, the authorization of a bank loan takes a day or two. Even long-term loans take only an extended period to approve. As a result, term loans are a considerably faster method of funding when compared to other possibilities.
Preserves Ownership Equity
Because term loans are a type of debt financing, they do not affect the corporation's shareholder equity, which stays intact. Furthermore, unlike with equity funding, business owners do not have to exert any influence over operations.
The Advantages of FlexiLoans Term Loans
Term loans are a key component of project finance. The following are some of the benefits of term loans:
From the Borrower's Perspective
- Cheap: It is a less expensive source of medium-term borrowing.
- Tax Advantage: Interest on a term loan is a tax-deductible expense, so there is a tax advantage on interest.
- Adaptable: Term loans are loans that are negotiated between borrowers and lenders. As a result, the terms and conditions of these types of loans are not restrictive, allowing for some degree of flexibility.
From the Lender's Perspective:
- Assured: Banks and other financial organizations give term loans in exchange for collateral; thus, term loans are secured.
- Regular Sources of Income: Regardless of the borrower's financial situation, the borrower is required to pay interest and repay the principal, ensuring the lender receives consistent revenue.
- Adaptation: Financial institutions may require borrowers to convert term loans to equity to avoid default. As a result, they might get the authority to manage the company's affairs.
Types Of Term Loans
Businesses can pick from a variety of different forms of term loans. They are frequently tailored to the needs of borrowers depending on parameters such as the amount of capital required by the business, the borrower's repayment capability, and the corporation's economic health in terms of profits and cash on hand. The majority of the loan's terms, including the interest rate charged, are determined by these criteria. The most often used categorization scheme for term loans is loan tenure. As a result, the following types of term loans exist:
Short-Term Loans: These are short-term loans with a maximum duration of 2 years. Typically, these loans have a term of one to two years. These loans are typically used to meet the business's day-to-day demands or meet the firm's working capital requirements. A firm can obtain a short-term loan from a variety of sources. They include commercial banks, trade credit, and bill discounting.
Generally, short-term business loans have a higher interest rate than some other types of term loans, owing to the shorter repayment period. These loans may even require weekly repayments if the loan term is extremely brief. Any business considering such a loan should keep in mind that these loans include interest, but the costs are also greater if the firm fails to make any payments.
Medium-Term Loans: These are loans with a term of between two and five years. These loans are a combination of short- and long-term loans. Typically, firms obtain these sorts of loans to renovate or repair a fixed asset. Consider the refurbishment of a showroom as an example. These loans have certain features of both short- and long-term loans. While the interest rates are higher than those on long-term loans, the information required during the loan application procedure is far less demanding than on longer-term loans.
Long-Term Loans: These are loans with a length of more than five years in the majority of circumstances. Tenure periods may potentially exceed 25 or 30 years, depending on the nature of the obligation. Due to the larger ticket sizes and accompanying risks, most long-term loans require collateral. Home loans, auto loans, and loans against property are all examples of these types of loans. Rates are also cheaper when loans are secured. Interest rates are typically higher in these instances owing to the increased risk.
Term loans in India are of two categories:
Secured Loan: If an individual wants to obtain a secured loan from banks or NBFCs, they must offer collateral security to the lender. Collateral might include equipment, machinery, raw materials, stock, or residential or commercial real estate.
Unsecured Loan: The majority of financial institutions offer unsecured business loans, meaning the lender does not need any collateral or security. Banks and non-bank financial companies (NBFCs) charge reasonable interest rates on business loans, as there is no risk to the borrower.
How to Apply for a Term Loan with FlexiLoans
Complete application It is fast and takes only 5 minutes. Upload documents Easily upload your documents online. Credit analysis We will check your documents and evaluate your application. Loan disbursement Once approved, funds will be credited to your account.
While applying for a term loan used to be a long procedure, it has now been simplified and made entirely online.
All you need to use is a term loan application form, and while applying, it requires soft copies of your documents, a reliable internet connection, and a solid credit score. The entire process should take no more than a few business days, during which time you will see a reflection of the money that has been moved to your account. There are four methods to check term loan eligibility:
While applying for a term loan used to be a long procedure, it has now been simplified and made entirely online. You are not forced to shop around for the best interest rate, nor are you forced to wait for clearance or the submission of documents.
All you need to use is a term loan application form and, while applying, it requires soft copies of your documents, a reliable internet connection, and a solid credit score. The entire process should take no more than a few business days, during which time you will see a reflection of the money that has been moved to your account. There are four methods to check term loan eligibility:
- Online Application: Visit the FlexiLoans website and complete the application process by entering all necessary details accurately. FlexiLoans will use this information to determine your business loan eligibility.
- Online submission of required documents: Upload all necessary documentation, including identification documents, current account bank statements, and business identification papers.
- Credit Analysis: We'll evaluate the business's performance and operations to determine the amount of money you're willing to borrow and the applicable interest rates. Our loan officers will assist you in comprehending the offer and making an informed choice.
- Loan Disbursement: After checking the paperwork and accepting the loan, FlexiLoans will exchange the loan agreement. Within 48 hours of signing the contract, funds are transferred to the applicant's account.
Eligibility Criteria for Term Loan
|Age of business (from the date of registration)||1-year|
|Monthly business sales||Minimum ₹2,00,000|
FlexiLoans has simplified its eligibility conditions to the bare minimum to expedite the processing of term loans. We don't ask for much documentation or paperwork that can slow down the loan approval process.
- You must be 21 years of age when applying for the loan and not more than 65.
- Flexi-Term loans are available to individual corporations, sole proprietors, and private companies involved in trading, production, or services.
- The applicant must have worked in the industry for three years and have at least five years of experience.
- offers term loans to those businesses that have been running for at least a year and have monthly total sales of at least $2 million.
- If the company has been in business for more than three years, you can apply for a business loan.
- We would also ensure that there are no errors in previous accounts and, as such, the company is tax compliant.
Term Loan Interest Rates
|Types of Fees||Applicable Charges|
|Interest Rate||Starting from 1% per month|
|Loan Amount||₹50,000 to ₹1 crore|
|Loan Tenure||Upto 36 months|
|Processing Fee||2% of the loan amount|
Documents required for Term Loan
|Personal KYC||PAN card|
|Residential Address proof (Any one)||Rent agreement, driver's license, voter's ID, ration card, Aadhaar card, passport|
|Banking||Last six months' current account bank statement|
|Business documents (any one of the following)||GST registration certificate, shops, and establishment certificate|
|Financial documents (for loans greater than Rs. 20 lakhs)||2 years of audited financials, the last 2 years of ITR, and 6 months of GST returns|