Introduction
Most businesses usually needs additional funds to enable them expand their operations and maximize on their profits. To achieve this expansion, they may apply for term loans from various banks and other lending institutions. It should therefore be the aim of every employee in the firm to ensure that the business is in good position to get these funds from the bank and other lending institutions at lower interest rates and that the amount given to the business is large enough to cover its expansion plans. Some businesses may work towards achieving relaxation of the lending terms by the banks. The banks on their part may consider several factors before extending term loan to any business.
Step 1
Some of the factors that the banks may consider before awarding term loans to any business include regular repayment history for the existing businesses. This means that the business must have repaid the previous term loans that might have been awarded to them by the bank and other lending institutions. This will serve to convince the lender that the borrower always repay loans on a regular basis and may not be considered as risky borrowers who may fail to repay the loans completely.
Step 2
The borrowers that have pre existing relationship may also find it easy to be given term loans by the banks and other lenders. It is therefore very important that the businesses develop a good working relationship with various banks and lenders even when they do not want to borrow from them. This may do by having the business accounts with the specific bank and even opening employees accounts with the bank in question.
Step 3
Those businesses with strong performance records in terms of their [profits and turn over would also be given term loans with a lot of ease. This is because from their profit margins, they lender can always verify that the business would be able to repay these loans within the stipulated time frame.
Step 4
Credit rating is always another factor that may help a business to secure term loan very fast. Those businesses with high credit scores are always known to have good loan repayment history and do not always have high risks of defaulting term loans repayment.
Step 5
The borrower may even propose short repayment periods; this will go a long way to increase their chances of being awarded term loans as the lender will be sure of recovering their money within very short durations of time. If the amount to be borrowed is more than some specific amount set by the bank, credit ratings may be required by some lenders.
Conclusion
Big firms with fixed assets may also present them as collateral. The lenders can always sell the collateral to recover their money should the borrower default in repaying. The value of the collateral always determines the amount of term loans that a business may be given. Those businesses that require large amounts can always provide collateral that have high values. This method of securing term loans may not be suitable for small businesses whose assets have low value as it will limit the amount they can be allowed to borrow.
