The term loans

Banks may grant loans to businesses in the short medium and long term which is called as term loans. When talking about the term loans they are defined according to the duration of the loan. The term of a loan is important; the conditions for long-term loan are not the same as that of the short term loan. In real estate, loans given out are most long-term loans that is the repayments spread over a period of more than 7 years. For the short-term credit, it is a credit whose duration does not exceed 2 years. Most of the short term loans are given out for the consumer products. Generally 70% of the maximum net amount of investment will be given as term loan and the additional 30% need to be raised by the borrower himself.

Though each bank shall fix their own lending rate of interest, the interest rates for the short term loans will be more than the long term loans. The duration for the short term will be less than two years. The term for the medium term loan is between 2 to 7 years and for the long term loan it is between 7 and 15 years which depend upon the nature of investment and the repayment capacity of the company.

The short-term loan is a loan whose term is less than 2 years. The medium-term loan is a loan whose duration is between 2 and 7 years. The long term loan is a loan whose duration is between 7 and 15 years (especially for commercial property). Depending on the nature of investments and the repayment ability of the company, a grace is possible. Apart from the interest, the borrower has to pay one time processing fee or the administrative fee and yearly recurring insurance premium against which the loan is raised.