Term Loans & Project Funding

Different financial organizations have different time periods allotted to the various kinds of loans that they offer. Most organizations that offer unsecured business loans, claim to disburse the small business financing option of a business loan in roughly five to seven working days. This comparatively faster access to funds is helping close the lending gap that SMEs in India mostly go through. SME Corner – an online lender of unsecured business loans offers loans within three business days, if all the paperwork and necessary processes are in place.

Longer repayment period With a longer repayment period, you’re not as pressured to pay back the entire loan amount quickly; however, this doesn’t mean that you should push your monthly payments to the back of your head. As this is a long-term expense, you still need to have a plan to tackle the debt. Lower interest rates Long-term loans usually have lower interest rates than short-term debts. This is because the application for long-term financing is much more stringent because more risk is involved being that more money is involved as well; however, as you’ll find out later, you’ll spend more on interest with long-term loans. Can fund big-ticket expenses The goal of any business is profits, and with that, comes the ability to scale or grow. When you started out your business, you wore many hats; you did finance, marketing, sales, purchasing, and what have you; however, as your business grows, a point in time will come wherein you’ll have to hire people and your basement or garage is unsustainable to call your office. The more your business scales, expenses are bound to crop up, and some of them will be expensive. If you have a need to automate the production of your product, you’ll need to purchase the machinery. What if you need multiple machines? This can come with a hefty price tag. Enter long-term loans, they can fund big-ticket expenses such as funding a property purchase to call your new office.

If the borrower fails to make the repayments, the lender will question the borrower’s liquidity position and the company’s existence will be at stake. Debt financing increases the financial risk of the company. It adversely affects the benefits of the shareholders. In addition to the collateral security, the borrower will have to tend to the restrictive covenants imposed by the lenders. The borrower will have to close the existing loans and must maintain the asset base and not take another loans. This causes unnecessary interference in the firm’s functioning. Since the terms and conditions are negotiable, there is chance that it might affect the interest of the lender. The lender of term loan will have no control over the company’s affairs and it leads to the lender asking the borrower to convert the loan to equity. Risk Of Default and Loss Of Asset – If your business is unable to repay the loan (default), the lender can and likely will take possession of the collateral asset. Also, the value of the collateral asset lost may be greater than the actual value of the secured business loan (e.g., building or real-estate). Your business may not survive the loss of the pledged asset if it critical to its operations. Start Ups Need Not Apply – Lenders requirements of loan recipients normally require that a business have as least two years under the same ownership and be profitable to qualify for a secured business loan. While the lender will take into consideration the credit and financials of the business, it is the type and value of the collateral asset pledged that will be the major consideration. If your business is new or doesn’t have strong financials, getting approval of a secured loan will be difficult.

You can apply for a term loan. However, banks and financial institutions do not lend money to people with poor credit history. You need to check with a few banks to find out if they consider applicants with a bad credit history. In most of the cases, they levy relatively high rate of interest on term loans to people with a bad credit score. The other option is to consider a secured loan. Even a small secured loan can help you improve your credit score significantly. However, if you have a poor credit rating and secured loans are not an option, it is best to not think of taking out or even applying for more credit. Every time your application is processed, it is a hit on your credit report. Multiple failed applications within a short span on time in addition to outstanding credit will raise more than one red flag. Simply put, if your credit is bad, improve it before you consider applying for new credit. You are entitled to obtain one free credit report from CIBIL every year, and more for a fee. If you have not checked your own credit score recently, this report will help you know which debts are having the worst effect on your rating and address them accordingly.

Long-term loans are better than short-term loans as they correspond to lower EMIs. They do not push the borrower to repay the loan in a short span of time. This does not put excessive stress on the borrower’s overall budget as well.

All types of small businesses could benefit greatly from this type of loan, however, companies that have mutual funds, vehicles, inventory, equipment, accounts receivable, land, buildings or other property to put up as collateral will have significantly lower payments and significantly longer repayment periods as compared to unsecured, collateral-free loans

Qualifying for a TERM LOAN from BANK is simple. You just need to fulfill the following criteria to avail the benefits of the loan:

• You should be between 25-55 years old.

• Your business should have a vintage of at least 3 years.

• Your business should have its Income Tax returns filed for at least the past 1 year.

You may need to submit other relevant financial documents at the time of document verification. You will be informed of these as and when required.

Here is a list of the Term Loan Business customer profiles that we consider: