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TERM LOAN
Term loans are also know as project finance loans. Term loans can be taken from financial institutions and commercial banks. Term loans are generally taken for new projects , expansion or diversification of projects. Bank term loans are generally in the form of working capital term loan though banks also do long term financing of projects. Working capital loans are short term loans. 

Characteristics of term Loans

  • Maturity - term loans for projects generally have a longer maturity period such as 5-15 years. Repayment may be re scheduled if the borrower and lender agrees.
  • Security - It play a vital role. in today's world you cannot imagine any term loan with security. All term loans are secured loans. Secured loans is a loan that has specified assets/ security pledged as collateral.

 

Procedure for taking term loans

If you planning to take term loan for your business you need to follow the following steps.

·         First of all the borrower needs to submit the application form along with the comprehensive project report. The borrower should provide the following information in his application or in project report  (a)  Company details  such as Particulars of the company, Background of the company, Promoters,  Board of Directors and capital structure and management (b) Information about group Companies ,(c) Proposed Project information such as Capacity , Implementation process , Project cost , current status , any statutory approval required for the project , industry trend, Means of finance, Operational Plan and Marketing and Selling arrangements  , (d) Business overview, (e) Risk Analysis and mitigation (f) Profitability Projections (g) Financial indicators and SWOT analysis (h) Proposed Term Sheet.

·         Once you application is received by the bank or the financial institution. They review it carefully. If they need any further information related with the project. They will inform you of the same. After submission of all the required documents, if the bank or financial institution will agrees to take exposure in your project they will give you the term loan sanction letter. In the other case if the bank thinks that the project is not viable they will reject the proposal. You can reapply to the bank after making necessary modification supported with proper documentary proofs.

·         Once you get the sanction letter, you would need to accept it with a certain time frame as mentioned in the sanction letter. If you have any issues with any of the sectioned terms, you can request the bank to relook on the issues, providing bank or the financial institution with solid reasons for relooking into your request.  Remember if the sanction letter is not accepted by you within the specified time frame, the sanction would lapse and if still you want to take the loan , you would need to reapply to the bank or the financial institution for revalidation the term loan.

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