What is a Term Loan?
A Term Loan is a fixed-tenure credit facility given to a business for a specific purpose — typically for setting up new capacity, purchasing machinery, expanding operations, renovating premises, or funding other capital expenditure. Unlike a revolving limit, a term loan is disbursed as a lump sum (or in tranches for project-linked loans) and repaid through fixed EMIs or structured installments over an agreed tenure.
Because the repayment schedule is fixed, term loans give businesses better long-term financial planning while enabling growth-oriented investments that a short-term working capital facility cannot fund.
How Term Loans Benefit Your Business
- Funds long-term capital needs like machinery, equipment or expansion
- Fixed repayment schedule aids financial planning
- Can be structured with a moratorium period during project gestation
- Frees up working capital limits for day-to-day operations
- Available against a range of collateral options
Basic Eligibility for Term Loans
- Business operational for a minimum of 2–3 years (project-specific relaxations possible)
- Clear purpose / project for which the loan is being availed
- Adequate repayment capacity based on projected cash flows
- Acceptable collateral or security as required by the lender
- Satisfactory credit history of the business and promoters
Loan Details
| Parameter | Details |
|---|---|
| Rate of Interest | 9% to 15% per annum |
| Professional Segment | 8.5% to 12% per annum |
| Minimum & Maximum Loan Amount | ₹5 lakhs to ₹25 crores+ |
| Minimum Business Vintage | Minimum 2–3 years |
| Age Limit | Min 25 years – Max 65 years (at loan maturity) |
Documents Generally Required
- KYC of business and promoters
- Project report / purpose of loan
- Last 2–3 years' financial statements
- Bank statements (last 12 months)
- Collateral / security documents (if applicable)