Businesses routinely require funding for expansion, purchasing equipment or hiring employees. These often demand large capital investments, which can potentially affect cash flow. While other forms of financing such as purchase order funding or purchase order financing and working capital loans certainly exist, term loans have several advantages over them.
What are Term Loans?
Term loans are a medium to long-term financing options, typically offered for a period ranging from 1-10 years. They are typically secured for expansion, asset acquisition, diversification, etc., providing a large amount of capital in a lump sum. Term loans are a popular source of financing because of the benefits they entail. Let’s take a look at the benefits of a Term Loan.
1. Lower Interest Rates
In casethey are availed for a longer duration, term loans are offered at lowerinterest rates than those with a shorter term. Moreover, the interest rates arefixed, and do not vary during the loan’s lifetime.
2. Increased Flexibility
Term loans offer a great deal of flexibility. From the duration to theprincipal and interest rate, there’s scope for quite a lot of negotiation. Thebetter your business’ credit score, the more flexibility you can enjoy when itcomes to loan covenants.
3. Frees Up Cash Flow
When abusiness takes a term loan, it effectively frees their cash flow for use inother areas, as the loan amount takes care of the funding required for largecapital investments. For instance, a company can take a term loan to fund ahiring round. This will give cover costs for the time it takes to train employeesbefore they can actually start contributing to the bottom line.
4. Quick Approval
Short-term loans are usuallyapproved within a day or two. Even long-term loans do not require a long timefor approval. This makes term loans a much quicker form of financing comparedto other options.
5. Preserves Shareholder Equity
Because term loans are a form ofdebt financing, they do not affect shareholder equity in the company, whichremains intact. Additionally, business owners need not relinquish any degree ofcontrol over operations, unlike in the case of equity financing.
Tata Capital offers easy to apply for and secure term loans. These term loans are ideal for funding brownfield projects, purchasing machinery, acquisitions, refinancing existing debt and other similar requirements. What makes these term loans an especially attractive proposition is the fact that we strive to work with a solution-oriented approach that places the customer’s needs at its heart and goes the extra mile to serve them.
Get instant term loans with quick approvals today.
