Term Loans
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Advanced Bank Management — CAIIB.
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Key financial check: ****Debt Service Coverage Ratio (DSCR)?
minimum benchmark normally ≥ 1.5 for industrial term loans.
Key financial check: ****Liquidity ratios?
current ratio, quick ratio, working-capital turnover.
Purpose — Term Loan / Working Capital Loan?
Term Loan: Fixed asset purchase — plant, building, machinery, infrastructure; Working Capital Loan: Day-to-day operations — raw material, wages, utilities
Tenor — Term Loan / Working Capital Loan?
Term Loan: Long-term (3–15 yrs; up to 25 yrs for infra); Working Capital Loan: Short-term (≤ 1 year, renewable)
Repayment — Term Loan / Working Capital Loan?
Term Loan: Fixed EMI/instalment schedule; Working Capital Loan: Payable on demand; revolving
Key financial check — Term Loan / Working Capital Loan?
Term Loan: Debt Service Coverage Ratio (DSCR); Working Capital Loan: Liquidity ratios (current, quick)
Interest — Term Loan / Working Capital Loan?
Term Loan: Charged on full sanctioned amount post-disbursement; Working Capital Loan: Charged only on utilised portion
Security — Term Loan / Working Capital Loan?
Term Loan: Primary = asset financed; collateral common; Working Capital Loan: Hypothecation of stock and debtors
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