Medium-Term Loans: Benefits, Eligibility Criteria, Documents Required, and How to Apply

Spread the cost of a larger expense

Instead of paying the full cost of equipment or another eligible expense from current cash, you can repay the borrowing over the agreed tenure. This preserves cash at the outset but creates a continuing repayment commitment.

Match borrowing to the investment

A repayment period measured in years may suit an asset that contributes to business operations over several years. Consider its useful life, maintenance costs, and expected contribution before choosing the tenure.

Plan repayments against cash flow

A defined repayment schedule helps you forecast debt payments alongside rent, wages, supplier bills, and other commitments. If the rate is floating, allow for possible changes under the loan agreement.

Compare instalments with total borrowing cost

A longer tenure can reduce the monthly instalment but increase total interest when the principal, rate, and repayment method remain unchanged. Medium-term loans do not automatically have lower interest rates or higher limits than other loans. Compare the actual offers.

Eligibility depends on the lender's product criteria and assessment of your ability to repay. There is no universal credit-score, business-vintage, or revenue threshold for every medium-term loan.

Meeting published criteria does not guarantee approval. The lender may verify the information and assess the application before making a decision.

The annual percentage rate (APR) expresses the annual cost of credit, including interest and applicable charges included in its calculation. It gives you a broader comparison than the interest rate alone.

For covered retail and Micro, Small and Medium Enterprise (MSME) term loans, review the Key Facts Statement (KFS) before accepting the offer. Check the APR, repayment schedule, deductions, and conditional charges, and read them alongside the loan agreement. The Reserve Bank of India has issued KFS disclosure requirements for covered loans and advances.

A longer tenure lowers the monthly instalment but increases total interest when the principal, rate, and repayment method remain unchanged.

Consider a Pune-based manufacturer borrowing Rs. 10 lakh for equipment. The following illustration assumes a fixed interest rate of 15% per annum, monthly reducing-balance calculations, and no fees, moratorium, or prepayments.

The 60-month option reduces the monthly instalment by approximately Rs. 10,875 but adds approximately Rs. 1,79,444 in interest.

EMI = [P × r × (1 + r)ⁿ] ÷ [(1 + r)ⁿ − 1]

Here, P is the loan amount, r is the monthly interest rate, and n is the number of monthly instalments. Total repayments are calculated using unrounded EMIs and rounded to the nearest rupee. Actual costs depend on the sanctioned terms and applicable charges.

The lender's checklist determines which documents you must provide. Depending on the applicant and product, prepare identity, business, and financial records, along with documents related to the loan purpose or security if requested.

This is a preparation guide, not a mandatory checklist for every lender. Confirm statement periods and any conditional documents before applying.

The main difference is the repayment horizon and how it fits the funded expense. The following bands are illustrative, not universal lender definitions.

Loan rates do not follow a universal short-to-long ranking. Security, credit assessment, product terms, and pricing also affect the offer.

Calculate your funding gap, compare suitable offers, and submit your application through the selected lender's authorised channel.

• Define the expense, including purchase, installation, and related operating requirements.

• Calculate the borrowing amount after deducting the funds you plan to contribute.

• Test repayment capacity, including existing debt and a slower-sales scenario.

• Compare offers by tenure, APR, net disbursal, security, and repayment conditions.

• Prepare the requested documents and resolve inconsistencies before submission.

• Submit the application, complete verification, and respond to document requests.

• Review the sanctioned terms and confirm the repayment schedule before accepting.

If you check a pre-approved business loan offer, review its conditions. An initial offer does not mean the loan has been sanctioned or disbursed. 

A business loan can finance equipment, premises improvements, or expansion when the available tenure and repayment structure fit your budget. First calculate the investment and operating costs, then compare the repayments with the cash available to your business.

The Bajaj Finance Business Loan offers eligible applicants loan amounts from Rs. 2 lakh to Rs. 80 lakh, with tenures from 12 months to 96 months. This overall tenure range extends beyond the illustrative medium-term band used in this article.

Available variants include Term Loan, Flexi Dropline Loan, and Flexi Hybrid Loan. The business loan is unsecured, so collateral is not required. Applicants need KYC documents, a PAN card, proof of business ownership, and additional financial documents where requested. Interest rates are 14% to 23.50% per annum, and processing fees can be up to 4.72% of the loan amount, inclusive of applicable taxes. Other charges may apply by variant and circumstance.

• Click the 'Check Loan Offer' button to open the online application form.
• Enter basic details, including Name, PAN, Date of Birth, PIN Code, and Business details, and click 'CONTINUE'.
• Complete banking verification and continue.
• View your offer details, select the loan type — Term Loan, Flexi Dropline Loan, or Flexi Hybrid Loan — and choose the repayment tenure.
• Review the details and submit the business loan application.