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Decoding the difference between flexi and term loans for business

Flexi vs. term loans: Unraveling the difference for business financing

difference between flexi business loans and term loans


In this ever-changing landscape of business financing, entrepreneurs encounter diverse options to fuel their operational needs and drive expansion. From overcoming short-term and long-term fund needs to meeting equipment requirements, the need for additional funding is a recurring theme for businesses. While the need for a business loan is undeniably vital, the choice between flexi business loans and traditional term loans can confuse businesses. 

In the traditional paradigm, term loans have long been the go-to technique for financing business projects. However, the emergence of flexi business loans brings a new viewpoint to the table, offering entrepreneurs a flexible and adaptable option. The blog digs into the difference between flexi business loans and term loans, revealing how these financial instruments differ and significantly impact operational efficiency and repayment plans.

What is a flexi business loan?

A flexi business loan is a modern flexible financing option that helps businesses meet their immediate financial demands. The name ‘Flexi’ itself refers to the flexibility it provides borrowers in using the loan amount based on their distinctive requirements. 

Businesses of any size requiring financing for purposes such as debt management, expansion initiatives, strengthening working capital, enhancing liquidity, securing equipment financing, or storing inventory reserves can apply for a flexi business loan.

You may also like: Benefits of a business loan in India: Why should you consider taking one?

Features and Advantages of Flexi Business Loans

Here are some key flexi loan advantages and features of flexi business loans

  1. Loan limit- An access limit of a maximum of Rs. 30 lakh, dependent upon the loan terms and conditions and your eligibility standing.
  1. Approval criteria- Securing a flexi business loan hinges primarily on maintaining a commendable credit score. The better your credit history, the greater the potential loan amount at your disposal.
  1. Adaptable withdrawals- Flexi business loans empower borrowers to withdraw and prepay funds at their discretion. For instance, you have the liberty to extract a portion of the loan for immediate needs and settle it when pending payments arrive.
  1. Interest dynamics- The fascination of flexi business loans lies in interest calculation. It applies solely to the withdrawn amount, sparing you from interest accrual on the entire loan sum. This loan repayment flexibility reduces the overall cost of the loan.
  1. Diminished instalments- You can enjoy the freedom to pay only the interest component as your monthly instalment. This unique feature of flexi loans allows you to postpone the repayment of the principal amount, resulting in a substantial reduction of up to 50% in your actual instalment.
  1. Express lane approval- Flexi business loans offer a streamlined approval process, granting borrowers access to the sanctioned loan amount within a mere two hours.

Also read: Want to be debt-free soon? Here are some strategies to manage your debts!

What is a Term Business Loan?

Term loans emerge as a loyal financial backbone for local and small business funding, offering an upfront loan that spans over a period of 1-10 years. These loans serve as essential long-term financial commitments, with structured payment schedules and instalments covering both principal and interest, set at either fixed or floating rates. 

They become crucial during phases of asset acquisition, expansion, or diversification, providing a lump sum of capital over a medium to long-term horizon. 

Term loans are typically extended to small businesses in need of funding options for specific purposes such as equipment purchase, facility expansion, or acquiring fixed assets essential for their operations. 

Features and Advantages of Term Loans

Some key advantages and term loan features include- 

  1. Interest advantage- Term loans present lower interest rates, especially for extended durations. The fixed interest rates remain constant throughout the loan’s lifetime, fostering financial predictability.
  1. Flexibility- Offering a considerable degree of negotiation, term loans are flexible in terms of duration, principal amount, and interest rates. A robust business credit score enhances negotiation flexibility.
  1. Cash flow – By securing a term loan, businesses liberate their cash flow, redirecting funds to various operational areas. This allows for strategic investments, like funding a hiring round to cover costs during the training period.
  1. Prompt approval process- Term loans, whether short-term vs long-term loans, boast quick approval timelines. The efficient processing makes them a swifter financing option compared to alternatives, ensuring rapid access to necessary funds.
  1. Equity preservation- Unlike equity financing, term loans do not impact shareholder’s equity. Business owners retain control over operations, as term loans represent a form of debt financing that leaves equity intact.

Key difference between flexi business loans and term loans

Now that you’ve learned about the benefits and features of flexi business loans and term loans, let’s look at the main business loan comparison between the two.

Criteria Flexi business loanTerm loan
Loan amountFlexible amount disbursed Lump sum amount disbursed
Additional funds No new loan applicationRequires new loan application
Interest rateDepends on funds usedFixed interest rate
Repayment structureFlexible structureRigid repayment structure 
EMI patternCan pay interest before the principal amountFixed emi pattern
Fund allocation Suited for businesses with irregular incomeSuited for businesses with recurring profit

Loan amount

This is the first comparison for understanding business loan types. Flexible business loans allow organisations to borrow repeatedly under a defined credit limit. This enables on-demand access to funds without the requirement for a new loan application each time.

On the other hand, term loans provide a lump sum at the moment of disbursement, with borrowing terms, or restrictions based on the business’s reputation. Any additional funds for term loans require a fresh loan application, potentially causing delays. 

Rate of interest

Flexi business loans determine interest based simply on the amount borrowed, giving firms greater control over their financial flow. Early repayments further minimise the total interest load.

In contrast, term loans have a fixed interest rate structure that applies to the whole loan amount. This interest is distributed uniformly throughout the term of the loan, regardless of whether the business uses the entire fund amount or merely a portion of it.

Repayment structure

Flexi business loans provide repayment flexibility in business loans, allowing firms to tailor their repayments to their cash flow condition. They can repay more during surplus business periods and less during lean times. The option to pay only interest provides additional flexibility. 

Term loans, on the other hand, have a set repayment schedule that includes consistent monthly payments throughout the loan’s term. This remains unchanged even when the company’s cash flow fluctuates.

For example- In a term loan of Rs. 3 lakh at 15% interest, the EMI would be Rs. 7467. In contrast, a flexi loan for the same amount and interest rate could result in a substantially lower EMI of just Rs. 3876, almost 50% less each month.

Fund allocation and purpose

Flexi business loans are ideal for organisations that have changing cash flow, uneven revenue patterns, and or seasonal fluctuations. They are perfect for managing working capital needs, capitalising on urgent possibilities, and bridging temporary financial shortages. 

In contrast, term loans are best suited for businesses with clear expansion plans, significant investments, the acquisition of fixed assets, or funding long-term projects. They offer stability and structure for businesses with well-defined funding requirements.

Thus, with any financial product, businesses should weigh their advantages and disadvantages to make informed decisions based on their specific needs and financial situations.

Also read: Personal Loan vs EPF Advance

Flexible vs fixed-rate loans: Which one is better? 

In the ongoing argument between flexi business loans vs. fixed-rate loans, both forms of funding have distinct advantages and disadvantages. Flexi business loans, which are known for their flexibility, may appear to be a better option; regardless, it is critical to understand the possible drawbacks. 

These loans typically have higher interest rates than regular term loans, which may influence total loan expenses. Also, while the freedom to withdraw funds as needed is worthwhile, it can lead to uncontrolled spending if not managed effectively. 

The same goes for term loans. Owing to their rigid framework, they lack flexibility and need fixed monthly instalments, which can be burdensome for enterprises. In addition, while interest rates on term loans are frequently lower than those on flexi loans, they can still be extremely costly especially if the business chooses a longer payback term. 

Furthermore, the lengthy approval process and high eligibility requirements for term loans might be obstacles for firms in desperate need of capital.

Choosing the right loan for your business is dependent on your company’s specific circumstances and the need of business financing solutions.


Flexi business loans and term loans are two distinctive financing models. While flexi loans are known for their adaptability and financial flexibility in business loans, term loans give stability through structured instalments and fixed interest rates, making them ideal for long-term projects and asset purchases. 

Finally, the choice of selecting the best loan for your company is influenced by each business’s specific needs and financial health, emphasising the need to make educated financial decisions. To underlay more such concepts, stay tuned with StockGro!

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StockGro Team

StockGro is India’s first and largest ‘Social Investment’ platform aimed at helping you master the art of “Trading & Investment”. Trade, Invest and get rewarded to Learn everything about ‘Investments’ the fun-filled way.

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