Term Loan Syndication
Term Loans are the finances that the banks or a specific governmental institutes lend to an individual for a specific period of time, this specific period is called a “term” in this regard. The time period of this type loan may vary, with the lowest term being of 10 years and the largest term being of 30 years.
Purpose of term loans:
- You can get this finance for equipment.
- You can get finance for real estate.
- You can get finance for working capital & etc.
Once can easily say that this loan is mostly taken for business purposes. To that end, this type of loan is more suited for established businesses that have a sound financial background and can offer a good down payment so that the cost of loan is less.
Types of term loan:
Based on the repayment term provided to the debtor, there are two types of term loans:
- Intermediate: The intermediate term loan is the run which runs for less than three years. Now, the repayment of this type of loan is done through either the cash flow of the company or using balloon payments.
- Long term: The long term loan has the term of 3 to 25 years and requires the company to put forward their assets for collateral in addition to repaying monthly or quarterly payments either through cash flows or profits.
What you should consider while taking a term loan?
When it comes to term loans, always expect the interest to vary. We say that because there are two ways interest is levied on the principal amount for this type of loan.
- The floating interest rate: In this, the interest of your loan can vary during the tenure of the repayment.
- The fixed interest rate: as the name suggests, the rate of interest will never vary during the tenure of the loan.
Advantages of term Loan:
- This type of loan is considered to be cheaper.
- They are negotiable
- Due to the addition of collateral, there is not a huge risk for the bank or NBFC for loss.
However, accessing the term loan is not that easy. As the aspirant will have to go through a certain level of scrutiny to get through and get access to this type of loan.