Term loans are medium to long-term financing options, usually offered by banks for a period ranging from 1-10 years. They are secured for expansion, asset acquisition, diversification, or to provide a large amount of capital in a lump sum. A term loan is a great source of financing due to the benefits they entail. It is an affordable source for medium-term funding.
Interest payable on the term loan is a tax-deductible expenditure, and thus, taxation benefit is available on interest. These are negotiable loans between the borrowers and lenders. So, the terms and conditions of such types of loans are not rigid and give some flexibility. Since term loans represent debt financing, the interest of the equity shareholders is not diluted. Banks and other financial institutions offer these loans against security—so term loans are secured.