What Is The Length Of Average Business Loan Terms?

Curious about typical business loan terms? Want to know about the length of business loan terms here. Read Now.

25 Nov,2022 12:28 IST 178
What Is The Length Of Average Business Loan Terms?

Every company needs capital to pay for daily expenses, expand the business and ensure that the business sustains amid tight competition. However, the business owner can only invest a part of their savings as the capital needed for running a business is constant. Hence, such entrepreneurs turn to a business loan to raise immediate funds to invest in every aspect of their business.

However, it is necessary to understand all the included loan factors before applying for a business loan. One such factor is the average business loan term or the tenure for which entrepreneurs can take a business loan.

The Concept Behind Average Business Loan Term

When entrepreneurs take a business loan, the approval prospects depend on three factors; the loan amount, the interest rate and the loan term. However, the loan term directly affects the other two factors. The main reason for this is an entrepreneur's repayment liability after taking a business loan.

Lenders provide the business loan amount to the borrower by charging an interest rate dependent on the chosen business loan amount. However, entrepreneurs choose the ideal loan tenure as it directly affects the amount they must pay to the lender every month. The longer the business loan tenure, the lower the EMIs as the loan repayment gets stretched over an extended period. Hence, entrepreneurs must choose an ideal business loan term to avoid financial burden.

Length Of Average Business Loan Terms

The length of the business loan term depends on the amount and the type of loan. The types of business loans include unsecured and secured business loans. An unsecured business loan does not require pledging an asset as collateral, while a secured business loan requires the borrower to pledge collateral.

Entrepreneurs generally avail of an unsecured business loan for an average of five years. Lenders provide an unsecured business loan for a maximum period of five years, and availing of the maximum duration lowers the EMI payments considerably. However, entrepreneurs avail of an unsecured business loan for an average period of 2-3 years.

On the contrary, entrepreneurs take a secured business loan for a more extended period as the loan amount on a high-value asset pledged as collateral is high. Such loans have an average loan term of around 5-10 years. However, some specialised secured business loans offer lower tenures of up to 3 years.

Conclusion

Understanding the length of average business loan terms is vital to take an ideal business loan. You should analyse your business capital needs before choosing the preferred loan amount and term.

FAQs:

Q.1: How much business loan amount can I get?
Ans: Usually, lenders offer up to Rs 30 lakh as an unsecured business loan amount.

Q.2: What is the interest rate on business loans?
Ans: The business loan interest rates range from 11.25% to 33.75%.

Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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