Term loan is the most common type of loan available for small and medium entrepreneurs, SMEs, in India. In such kind of loans the lender provides a specific amount of money, usually at a fixed rate of interest, and there is a schedule for repaying the loan -- usually in monthly or quarterly payments -- over a certain amount of time or say for the short-term.
Term loan is mainly used as working capital during a particularly busy season or for the purchase of new equipment and machinery. Such kind of loan can also be used for the purchase of more expensive equipment, or for expansion or restructuring of your existing business.
Term loans can also be used to start up a business, open a second factory, or make significant capital improvements and is offered for a period of five to seven years.
However, obtaining a term loan is a bit more challenging. Typically, banks lend money to businesses that already have money, which makes it very difficult for a new business to secure a term loan.
Text: Bhupendra Achari, CEO, Easyfinance.in, a web site that provides information on home loans, car loans, personal loans, education loans, and term loans & project loan in India.
Photograph: Danny Moloshok/Reuters
Also see: Heavy interest on home loan? Switch lenders
Advertisement
