A business term loan is a fixed loan repaid in regular instalments over an agreed term, assessed on the business rather than on your salary. There is no single national rulebook: each bank sets its own business term loan requirements, and they also differ by type of business.
The clearest published example is Standard Bank’s Business Term Loan: the business must have been trading for 2 years or more and hold an active business transactional account at any bank. Use it as a benchmark, then confirm the terms of the lender you plan to use.
Eligibility Requirements at a Glance
For Standard Bank’s Business Term Loan:
- The business must have been trading for 2 years or more
- It must hold an active business transactional account at any bank
- Repayments are fixed and monthly, over 36 months up to a maximum of 60 months, with interest linked to prime
Other banks may ask for more or less. If you are looking for a term loan for your business, compare the trading history, account and term each lender asks for, not only the interest rate. A business that has traded for under two years may find that this product is not open to it and should ask the lender about other options.
Income and Affordability Requirements
Approval turns on whether the business can service the instalment. Standard Bank asks for a cash flow forecast, sales and purchases budgets, and projected income and expenditure.
Where the National Credit Act applies, the lender must take reasonable steps to assess the borrower’s repayment history and existing financial means, prospects and obligations, and, where the purpose is commercial, whether there is a reasonable basis to conclude it may succeed. The National Credit Regulator says providers must verify income. For a self-employed or informally employed person that means three months’ bank statements or the latest financial statements.
A loan granted without that assessment, or where the information showed you would be over-indebted, can be reckless lending under the Act.
Credit and Financial Requirements
Standard Bank runs credit bureau checks and asks for financial statements, a personal statement of assets and liabilities for all partners, members or directors, and details of the owner’s contribution and the proposed collateral. Nedbank’s guidance is similar: a bank examines credit history, past performance and projections, and may ask for collateral such as property, stocks, bonds, vehicles or equipment.
The National Credit Act does not apply to a credit agreement where the borrower is a juristic person (such as a company) whose asset value or annual turnover, together with related juristic persons, equals or exceeds the Minister’s threshold. That threshold was set at R1 000 000 in a 2006 notice, so ask the lender in writing whether your agreement is regulated.
Credit providers must register with the National Credit Regulator once they pass its thresholds. Search the NCR register of credit providers before you sign. You can also see your own credit bureau file free of charge once in any 12-month period.
Documents and Verification Required
Standard Bank lists the following for business lending:
- A business plan
- A cash flow forecast, sales and purchases budgets, and projected income and expenditure
- Financial statements
- A personal statement of assets and liabilities for all partners, members or directors
- Details of the owner’s contribution, the purpose of the funds and the proposed collateral
If you bank with another bank, Standard Bank also asks for the business’s financial statements, three months’ bank statements, a facilities letter from your bank and details of collateral your bankers hold. See what you will need to apply. Other lenders publish their own lists, so ask for it first.
How to Apply and Improve Approval Readiness
At Standard Bank, sole proprietors can apply online, by phone, in branch or at AutoPlus ATMs. Private companies, partnerships and CCs must apply in branch and complete a suretyship form, which makes the signatories personally liable for the debt. With other banks, ask whether surety is required before you apply.
- Prepare the business plan, forecast and financial statements before you apply
- Show the specific use of the funds and how the loan will be repaid
- Match the term to the life of what you are funding
- Check your own and the business’s credit record first
- Compare the full cost of credit, including fees, and not only the rate
Frequently Asked Questions
How long must my business have traded?
At Standard Bank, 2 years or more for its Business Term Loan. Other lenders set their own periods, so confirm with the bank you are applying to.
What is a term loan for your business?
A loan of a fixed amount repaid in fixed instalments over an agreed term. Standard Bank’s version runs for 36 months up to a maximum of 60 months, with interest linked to prime.
Will I have to sign personal surety?
At Standard Bank, private companies, partnerships and CCs must complete a suretyship form. Other lenders may differ. Suretyship makes you personally liable if the business cannot pay, so understand it before you sign.
Does the National Credit Act protect my business?
Not always. It does not apply to a juristic borrower at or above the Minister’s threshold, which was R1 000 000 in the 2006 notice. Ask the lender to confirm in writing.
Terms and document lists differ by lender and change over time, so confirm the current requirements with the bank before you apply. See our loan requirements guide and browse all finance and funding requirements.