Understanding Fixed Term Loans
A term loan is a loan that is granted to you by a lender for a fixed period of time. It is one of the easiest ways to raise finance for your business, provided you can show that you are able to afford to make the loan repayments.
This is how it works:
- You borrow a sum of money.
- You agree to pay it back, together with interest, at a monthly amount for a set period of time:
- The amount of interest you are charged is directly linked to your perceived risk profile.
- Interest rates can be fixed or linked to prime – if they are linked to the prime rate, then your repayments change every time the prime rate changes.
- The term is usually 60 months, but can vary between 1 – 10 years, depending on how you intend to use the money. For example, if you are buying a business property, then the loan would be for 10 years, but if you are using the funds for other business needs, the term will be shorter.
- There may also be a once-off administration fee to be paid.
- Most lenders need you to provide collateral before they will approve a term loan.
- If you don’t have collateral, you must ask your bank/lender if they are a Sefa Credit Guarantee partner. If they are, then Sefa will stand guarantor for up to 90% of the collateral.
Below are some links to help you learn more about Term loans, Collateral and other helpful information regarding access to finance:
- Term loans: https://www.finfind.co.za/understanding-term-loans
- Collateral: https://www.finfind.co.za/learn-more-about-collateral
For more help and an opportunity to find a lender/s that matches your specific needs, go to www.finfind.co.za.
