A term loan is taken for the production, operation, development, and expansion of any commercial venture. Any company may need a significant amount of financial investment at any stage. As a result, companies seek capital from qualified lenders.

Loans are, without a doubt, the lifeblood of the financial community. Most business loans are taken out for a specific purpose and returned within a mutually agreed-upon time frame. These loans are known as term loans since they only last for a set time.

A term loan is a type of commercial lending with predetermined repayment terms. Until the loan matures, borrowers must repay it in monthly instalments or EMIs. These loans are considered one of the most cost-effective options for businesses. The loan amount, interest rate, loan period, repayment schedule, and whether the loan is secured or unsecured.

The repayment sum for this loan is predetermined. The type of loan chosen and the borrower’s eligibility determine this amount. The interest rate on this business loan could be fixed or floating. Throughout the loan tenure, the company must clear the debt in EMIs according to the repayment schedule.

Types of Term Loans

The most common method of categorising term loans is loan tenure. As a result, there are three types of term loans.

Short-term loans are often repaid within 12 months.
Intermediate-term loans, majorly used for purchasing machinery, stocking up inventory or expanding the business, last for up to 84 months.
Long-term loans are repaid over a longer duration, starting from 5 years.

Types of term loans in India

There are two types of term loans in India: secured and unsecured. Collateral security in equipment, stocks, or real estate property must be presented to the bank or NBFC for a secured term loan. Unsecured loans do not require submitting any collateral or security to the lender, but the interest rate is higher.

While securing a term loan used to be a time-consuming process, it has now been streamlined and made entirely available on the internet. ABV Debt facilitates term loans without any hassles. The fastest turn-around time and payment flexibilities make it ideal for generating commercial funds.