Term Loans

The term loans are an important source of long term financing. Nowadays the term loans are provided by a wide variety of institutional lenders. The services are provided at convenient rates and are suited to meet the various needs of the borrowers.

Explanation of Term Loans

The term loans could be explained as a kind of primary vanilla commercial loans. They have the following characteristics:

  • Rates of interest are fixed
  • Date of maturity is fixed
  • Fixed schedules of repayment. The schedules of repayment could either be quarterly or monthly

Types of Term Loans

Following are the two different kinds of term loans:

  • Long-term loans
  • Intermediate-term loans

Users of Term Loans

The term loans are availed by a wide range of business firms. However, the term loans are considered to be the most suitable for the small business entities that have been doing well since their incorporation.

Supply of Term Loans

The biggest positive aspect of the term loans is that there are a lot of banks that are dealing in term loans. However, the terms and conditions of the term loans tend to vary according to the bank that provides them.

Uses of Term Loans

The term loans are mostly used in the following areas:

  • Buying out existent business entities
  • Construction
  • Big investments of money made in areas like gathering working capital or buying of equipments and machinery
  • Significant betterment in capital

Expenses incurred for Term Loans

The prices at which term loans are acquired are different for each bank. However, there are certain conditions that are always common. For example, if the borrower is able to clear the financial tests conducted by these banks he would be able to receive the term loans at lesser costs.

Requirements for obtaining Term Loans

The commercial banks look at the following characteristics of the borrowers before providing them with term loans:

  • Character
  • Amount of capital owned
  • Credit capabilities
  • Credibility of the business plans
  • Collaterals being offered


More Information Related to Finance Theory
Finance Concepts Debt Interest Rate
Public Finance Mortgage Loan Discount
Long Terms Financing Yield Curve Arbitrage
Finance Services Company Arbitrage Pricing Credit Derivative
Binomial Options Pricing Model Capital Asset Pricing Model Cox Ingersoll Ross Model
Black Model Black Scholes Model Chen Model
Liquidity Risk Commodity Risk Consumer Credit Risk
Systemic Risk Currency Risk Market Risk
Interest Rate Risk Settlement Risk Equity Risk
Gordon Model Monte Carlo Option Model Ho Lee Model
Rendleman Bartter Model Vasicek Model Hull White Model
Rational Choice Theory Modern Portfolio Theory Cumulative Prospect Theory
Efficient Market Hypothesis Arrow Debreu Model International Fisher Effect
Floating Currency Financial Risk Management Hyperbolic Discounting
Personal Budget Floating Exchange Rate Discount Rate

Last Updated on : 1st July 2013

This website is up for sale at $20,000.00. Please contact 9811053538 for further details.