Term loans usually reflect its lifespan, and thus also the determinant of their type.
- Short Term Loan: Usually, the tenor of such loans is less than a year and at times can extend up to 18 months.
- Intermediate-Term Loan: They are designed for tenors in a range from 1 year to 3 years at the maximum.
- Long Term Loan: It can run for periods exceeding upto three years and inclusive of 25 years. Generally, you need collateral to secure these loans.
Benefits and features of Term Loans:
- A Term Loan comes from a lender for a fixed amount with a fixed repayment schedule calculated through a term loan repayment calculator.
- Term loans are ideally suitable for the purchase of equipment or buildings/structures often termed as fixed assets.
- Long term loan repayments are ensured through fixed installments and not balloon payments as for lower terms. The best check is through a term loan installment calculator.
What is Term Loan Formula?
The formula is handy in determining payment on different types of loans, including business loans. The use of funds does not affect the outcome, but the deviation in repayment standard fixed amortization available through term loan calculator excel file may give differing results. Let us check the formula used to calculate a loan payment.
P = Payment
PV = Present value which is also the original loan amount
R = Rate per period
N = Number of periods.
Eligibility criteria of Business Term Loan:
The criteria differ from lender to lender and the repayment term envisaged for the loan. In banks, the rules and standards are stringently applicable as compared to new age Fintrechs like Lendingkart. Additionally, Fintechs cater for only short term and intermediate-term loans. The criteria enumerated below match that of Lendingkart.
- The eligible borrower enterprises can be any of the following:
- Limited Liability Company
- Private Limited Company
- The list of ineligible entities include:
- Charitable Institution
- The business must be in operation for a minimum period of six months.
- Preceding quarterly turnover in excess of Rs.90K.
- Business activity and location should not appear in the negative list.
Documents required for Business Term Loans:
Documentation is integral to any loan proposal. The list of required documents depends a lot on the size and type of loan, other than ownership. The compilation of the list of documents as a summary is in very general terms.
The determination of the actual requirement will be at the time of application and the need of the lender, which may seek specific documents for their records.
- KYC documents of the Borrower and the Business inclusive of PAN card.
- Proof of existence of business.
- Business registration certificate and other related licenses.
- Copy of Partnership deed, Certificate of Incorporation, Memorandum of Association as the case may be.
- Different financial documents.
How to apply for Business term loan:
Unlike banks, Fintech companies provide a digital platform for the loan application as well as processing. In banks also, there is a provision for online application of loans, but it is equivalent only to the expression of interest.
The actual application proposal, documentation, sanction, and disbursal confine themselves to brick and mortar branches or Credit Hubs. The three simple steps at Lendingkart are:
- Submit application online.
- Upload requisite documents.
- Get sanction and disbursal after evaluation and vetting of documents.
Fees, Charges and other Features:
Rate of interest calculated using the term-loan interest rate calculator is crucial to the cost of the borrowed fund. Besides, other features impact the life of the term loan in general.
Rate of Interest
12% to 24% per annum
One-time 1% to 2% of the loan amount
Up to a maximum of 36 months.
EMI or fortnightly
Since the loans are unsecured, no collateral is required.