Term Loan

Generally, Term Loan are availed for acquisition of capital goods or asset creation, such as Land, Building, Plant & Machinery, Equipment, for the Establishment of Units / Factories or to acquire the business-related long-term assets and for purchase of vehicles, etc.
Banks provide Term Loans to manufacturers /processing units / traders / service units, etc. These projects need to establish technical feasibility and economic viability. Banks / Financial Institutions will offer tailor-made loan products to suit the financial needs of MSME Unit / Corporate Business Groups.
Repayment schedule for term loans would be stipulated based on Debt Service Coverage Ratio, Cash Flows of the project and Repayment Capacity. Generally, repayment period will start from 1 year to a maximum of 15 Years.
Repayment would be by way of periodic instalments with appropriate repayment holiday / moratorium period during implementation of the project.
Rate of interest on term loans would depend upon various factors like nature of the project, quantum of loan, risk rating, repayment period and structure of the debt.
Collateral Security as per the norms of the Bank may vary from case to case, and depends on the risk perception of the Loan Proposal.

Types of Term Loans:

• Short term loans
• Intermediate term loans
• long term loans