Term Loan is normally extended for acquisition of Land, Building and machinery, purchase of vehicles etc. and also along with working capital finance as composite loans.
Term Loan is given both for industrial and non-industrial borrowers i.e. both for projects / activities involved in manufacture/processing/repairing and business / trading activities etc. The project needs to establish technical feasibility and economic viability.
Term loan is extended in different forms such as all rupee loans, foreign currency loans and Deferred Payment Guarantees (DPG) / acceptance facilities (other than foreign currency loans obtained from the foreign banks or branches of Indian Banks abroad without the back-up of DPGs issued by Banks in India).
Repayment schedule for term loans would be stipulated based upon Debt Service Coverage Ratio, cash generation and repayment capacity. Repayment would be by way of periodic instalments with appropriate repayment holiday during implementation of the project.
Rate of interest on term loans depend upon various factors like nature of the project, quantum of loan, risk rating, repayment period and structure of the debt.
Securities for term loans per se would be as per general lending norms of the banks and also depends on the risk perception of the individual account.