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10 Nov
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Capital is the life blood of every business irrespective of size. Almost every business requires financing at various points during the business lifecycle, and seeking external financing in the form a loan is a great way to bridge the gap and continue operations. This is where a Commercial Term Loan or Corporate Loan or Business Loan comes into picture. To better understand these financing options, lets read further.

Introducing Commercial Term Loans or Corporate Loans

Commercial Term Loans are very suitable for business owners who need long-term financing to provide for major business expenses. As these loans are backed by a security or collateral, it allows for competitive pricing, a higher loan amount, longer tenure and lower EMI amounts. These loans can be used for various purposes as explained below.

Use cases of Commercial Term Loans or Corporate Loans:

  1. Equipment Purchase: Commercial Term Loans are the preferred choice for purchasing equipment, including plants, machinery, or other technical or engineering equipment, and since equipment is expensive, it makes sense for business owners to get a loan instead of blocking capital in such purchases.

  2. Inventory Purchase: Commercial Term Loans are also available for inventory purchase in order to maintain adequate stock, and maintain smooth operations. Businesses at times try to buy inventory at discounted prices and external funding helps do so, by buying in bulk.

  3. Building Operational Capability: These loans can aid to build or expand operational capabilities thereby resulting in greater efficiency, and improved margins.

  1. Bill or Invoice Discounting: Bill or invoice discounting is one of the most common purposes of borrowing. It is fairly easy to get a bill discounting based loan, and the borrower is can get funds much earlier, making it an obvious choice for businesses.

  2. Purchase of Commercial Land or Building: Purchasing land or building requires extensive planning and investment, therefore business owners prefer to finance these expenses so as to maintain sufficient cash in hand.

Advantages of Commercial Term Loans

  1. Flexibility: Depending on the requirement of funds, business owners may avail different types of loans, they may opt for a working capital loan to meet the operating expenses. Companies also use these loans to meet a combination of short and long term funding needs. This flexibility makes it easier for business owners to maximize their convenience.

  1. Multiple Repayment Options: Borrowers are offered various repayment options which can be chosen as per their convenience. They can work out a repayment plan based on monthly cash flows in order to avoid a cash crunch situation.

  1. Low-Interest Rates: Business loans are not exorbitant. The interest rate is determined by the amount of loan, tenure, and loan type and market dynamics. There is a popular belief that loans are expensive, which is not true. Commercial Term Loans are available at very attractive and highly competitive interest rates.

  1. Easy Availability: Various lending institutions like Hero FinCorp offer Commercial & SME Loans which are quick, easy and transparent. This makes it easier for businesses to finance their operations.

  2. Sustain and Grow Business: These day's companies tend to manage their funding needs in a manner which suits their operations and business cycle. Making these options even more attractive.

Eligibility and Documentation

These requirements are largely similar but they do vary from one Bank/ NBFC to the other, commonly accepted documentation and eligibility criteria is given below for reference:

Eligibility Criteria:

  • A public company, private company, proprietorship and self-employed individuals

  • Should have been in the business for a minimum period of 3 years

  • Business should be profitable as per industry norms

  • The applicant should have a satisfactory credit score

 Documents Required:

  • Company constitution and registration certificate

  • Proof of Identity

  • Proof of Address

  • Bank Statements

  • Proof of Continuation of business

  • Profiles of partners and directors

  • Audited and projected financial statements for the last three years

A Commercial Term Loan is one of the most popular loans taken by business owners and entrepreneurs to fund their businesses. This is because NBFCs, Banks and other Financial Institutions offer Commercial Term Loans at attractive interest rates, and provide business owners with much-needed funds to continue growing and expanding their businesses. These loans can be repaid over a long period of up to 7 years, depending upon the amount and loan type. As long as you opt for a trusted Financing Partner, the overall experience and process would be hassle-free.

Need additional guidance on Commercial Term Loans? Visit us here.

Did You Know

Disbursement

The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.

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