Term loans are fixed-amount loans given to business owners by banks or nonbank financial institutions. Additionally, with fixed and variable interest rates, business owners can use it for capital expenditures and business expansion. It is a safe and effective method of raising funds quickly. The advantages of these loans include speedy fund disbursement, minimum documentation requirements, and flexibility in repayment.

Term loans can be used in the business sector to cover ongoing expenses or to preserve cash flow.

Types of Term Loans:

How to choose the right Term Loan for your Business?

In addition to classifying term loans according to the length of time they are repaid, borrowers can also determine how long an asset will take to yield a return. What you should know is as follows:

• Short-term loan :

The loans are due in full in a year and a half. Businesses in the manufacturing sector may utilize it as working capital for the acquisition of goods. It facilitates an increase in the business’s cash flow.

• Intermediate-term loan :

These loans may have terms ranging from two to five years. The company’s cash flow may depend on these loans. These kinds of intermediate-term loans are typically required by newly founded businesses.

• Long-term loan :

These loans have a maximum lifespan of ten years, but they can also last anywhere from three to seven years. The business gives its resources as security. Repayment terms could vary based on the company’s cash flow recognition or profit margin, such as quarterly or monthly. Large construction companies that are buying big-ticket items like buildings and heavy machinery are the best candidates for these loans.

Other than these, few other things to be considered in terms:

Term Loans Category:

• Secured Loan:

To obtain a secured loan from a bank or non-bank financial institution (NBFC), an applicant must provide collateral security to the lender. Submissions of collateral may take the shape of stock, machinery, equipment, or real estate, either commercial or residential.

• Unsecured Loan: 

The majority of financial institutions offer unsecured business loans, meaning that the lender doesn’t need to receive any collateral or security. For unsecured loans, banks and NBFCs provide interest rates that are rather higher than average.

Who can apply for a Term Loan?

Age Requirements: The applicant must be at least 21 years old when submitting a loan application, and they must be at least 65 years old when the loan matures.
The candidate must be a citizen of India.
Candidates must to have a high credit score.
Candidates ought to have a steady source of income.

What Documents Required to Apply for a Term Loan?

• Passport-sized pictures.
• Business plan/project report.
  completed the application.
• Passports, PAN cards, Aadhar cards, voter ID cards, driver’s licenses, utility bills (electricity, telephone, or water), etc. are
• xamples of KYC documents (identity, address, and age proof).
• Evidence of business address: title deeds, rental agreement, or lease.
• Proof of Income: Salary slips over the last six months.
• CIBIL report, should the lender request it.
  bank statement for the last 12 months.
• ITR, sales tax report, and the previous two years’ profit and loss statement.
• any further paperwork that the lending institution requests.

The bank representative may get in touch with the applicant after they submit their application, and they will handle the necessary bank procedures.

A business plan, sometimes referred to as a project report, is one of the most important documents on the list above when requesting a bank loan. This document is used by the bank to evaluate a project’s overall viability, risks, financial stability, and potential. The likelihood of a loan being approved rises with a well-written and compelling project report. You can create an engaging project report using Finline in less than ten minutes. In your language as well. Our reports are accepted by all banks operating in India, both public and private. To build your project report, click.