Repayment Of Term Loans

Term loan is a special type of loan and hence its repayment has an added importance. There are specific purposes for which the loan has been taken and thus there is no common way in which the loan repayment will be fixed. In most cases, the repayment has to be done in instalments with an allocation between capital and interest that is decided as per the working and time period for the purpose of the loans.

The repayment instalment can be either monthly or quarterly but the main factor that will determine this position is the cash cycle of the business. Every business has a unique cash cycle in the manner of the turnover and the way in which its debtors and creditors make the payments. This determines the cash flow for the business. If it is a regular business or trading activity then there will be a monthly cash flow but if it is seasonal or there is a specific time when the amount is received then the cash flow could vary. The latter case will require a separate type of repayment schedule and all the details will be fixed after taking these conditions into consideration. This makes the repayment procedure also easier.