Banking · Types of Finance
What is the primary distinction between term loans and working capital finance?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Term loans are regulated by the Reserve Bank of India (RBI), while working capital facilities are overseen by the Securities and Exchange Board of India (SEBI).
- 2Term loans are specifically utilized for financing fixed assets, whereas working capital finance is intended for funding day-to-day operational expenses.✓
- 3Term loans are usually granted for a one-year duration, whereas working capital facilities are repayable in monthly, quarterly, or half-yearly installments over an agreed period.
- 4Term loans are typically short-term and must be repaid within a year, while working capital facilities have a longer duration and can remain fully drawn for one year.
Correct answer
Term loans are specifically utilized for financing fixed assets, whereas working capital finance is intended for funding day-to-day operational expenses.
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