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Tata Capital > Blog > Wealth Services > Benefits of a Term Loan

Wealth Services

Benefits of a Term Loan

Benefits of a Term Loan

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 case they are availed for a longer duration, term loans are offered at lower interest rates than those with a shorter term. Moreover, the interest rates are fixed, and do not vary during the loan’s lifetime.

2. Increased Flexibility

Term loans offer a great deal of flexibility. From the duration to the principal and interest rate, there’s scope for quite a lot of negotiation. The better your business’ credit score, the more flexibility you can enjoy when it comes to loan covenants.

3. Frees Up Cash Flow

When a business takes a term loan, it effectively frees their cash flow for use in other areas, as the loan amount takes care of the funding required for large capital investments. For instance, a company can take a term loan to fund a hiring round. This will give cover costs for the time it takes to train employees before they can actually start contributing to the bottom line.

4. Quick Approval

Short-term loans are usually approved within a day or two. Even long-term loans do not require a long time for approval. This makes term loans a much quicker form of financing compared to other options. 

5. Preserves Shareholder Equity

Because term loans are a form of debt financing, they do not affect shareholder equity in the company, which remains intact. Additionally, business owners need not relinquish any degree of control 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.