Term Loans can be short term or long term that are usually given by some sort of financial institution. The loan amount that is taken by the borrower is usually repaid in regular payments over a period of time or a certain term. These loans are offered at both fixed and floating rate of interest. The repayment of term loan can vary from 12 to 60 months depending upon the agreement reached by the borrower and financial institution.
These term loans are used by SMEs for various purposes to run their business operations which include expansion, buying of machinery and raw materials, to manage cash flow, to meet the goals for working capital, etc. These are some of the basic needs of any small and medium sized venture.
Although SMEs faces a lot of questions while getting a term loan. There are multiple things and aspects that one must consider before making this decision. As making certain right decisions while taking a term loan can change the whole dynamics of the enterprise’s position. Here is a small checklist for all the SME owners who plan to take a term loan:
- Interest Rate: A major thing to keep in mind while deciding for a term loan is getting the interest rate that suits your enterprise’s needs. Now, different financial institutions will provide loans at different EMI for different reasons. There are always some sort of guarantees or conditions that one gets with varying interest rates. So it is important for any SME to decide if these guarantees and conditions they want for a higher interest rate or lower interest rates.
- Repayment Period: Repayment refers to the time allotted to pay back the loan taken by any SME. Different financial institutions will provide enterprises with different length of periods to repay the loan taken. These conditions should be settled before an SME goes to sign any agreement related to short or long term loan.
- Prepayment Option: There are certain times when a new SME suddenly gets a high inflow of cash through revenue or funding that they no longer require the EMI option. They should ensure that in such a situation they should be allowed to make a prepayment of the complete loan on a substantially lower interest rate. Because of such cases this becomes an important part of the checklist.
- Credibility and Efficiency of the Lender: The last thing for any SME to have on their checklist while taking a term loan is known the credibility and efficiency of their lender. The financial organization must be genuine and well established who would know the problems that SME deals with while taking such loans. Another factor is the efficiency, the process of application and loan disbursement should be as smooth as possible. It shouldn’t be the case that the loan is applied today but is received after months. The dynamics change for SME in a matter of days and they should be able to get the funding they need.
These are some of the important things that anyone should keep in mind while trying to get a term loan, be it short or long term. Especially keeping the last point in mind, it is crucial that the lender we are dealing with understands our needs and has the credibility and efficiency to provide with the best service and Oxyzo has achieved that credibility and efficiency and serves its associated with the best possible service.
