Business Lending Terms, Explained Plainly

Construction Finance

Loans that fund a real-estate project's build: land, approvals, construction, and completion, usually disbursed in stages against progress. In India it comes from banks (established developers, approved projects), NBFCs (earlier and faster, higher rates), and AIF or private credit funds (land, last-mile, special situations). Typical funding: 60–70% of construction cost. More: construction finance.

Loan Against Property (LAP)

A loan secured by mortgaging property you own — commercial or residential — while you keep using it. Indian lenders typically advance 55–75% of market value, for tenors of 10–15 years, at rates well below unsecured debt because the asset carries the risk. The standard way promoters unlock large capital without selling. More: loan against property.

Lease Rental Discounting (LRD)

A loan against the future rent of a leased commercial property: the lender discounts the lease's cash flows — usually 75–90% of their present value — and rent flows through an escrow that services the loan. Often the cheapest large-ticket money a property owner can raise, since repayment rides a contract rather than business performance. More: lease rental discounting.

Debt Syndication

Arranging a large loan across one or more institutional lenders: sizing, structuring, running the lender process, negotiating terms, and closing documentation. The point is competition and fit — several lenders considering one well-prepared file — rather than one bank's take-it-or-leave-it.

DSA (Direct Selling Agent)

A lender's sourcing channel: an agent empanelled to bring in loan files, paid commission by the lender on disbursement. Free to the borrower and efficient for standard small-ticket products, but not a substitute for borrower-side advice on large or structured raises. Compare: DSA vs debt advisory.

NBFC (Non-Banking Financial Company)

An RBI-regulated lender that isn't a bank: it cannot take demand deposits, funds itself from markets and banks, and prices loans roughly 2–5% above bank rates in exchange for speed and flexibility. In the ₹20–150 crore band, NBFCs are often the difference between a ten-week and a two-week sanction.

AIF Category II Debt Fund

A SEBI-registered pooled fund that lends privately — typically structured credit to companies and real-estate projects falling outside bank policy. Costlier than banks at roughly 15–20%+, but these funds finance what banks will not: land, last-mile projects, promoter-level and special-situation credit.

Private Credit

Non-bank institutional lending negotiated directly between a fund and a borrower — bespoke structures, faster decisions, higher pricing. In India it overlaps heavily with AIF debt funds and fills the widening gap between bank policy and mid-market reality.

Term Loan

A lump-sum loan repaid on a fixed schedule over a set tenor, secured or unsecured. The default instrument for capital expenditure, projects, and acquisitions — distinct from revolving working-capital lines that you draw and repay continuously.

Working Capital Loan / Cash Credit

Revolving finance for the day-to-day cycle — inventory, receivables, payables. Cash credit lets you borrow up to a sanctioned limit against current assets, with interest charged only on what you use. Banks dominate this product and limits are renewed annually. More: working capital and term loans.

Bridge Loan

Short-tenor money — weeks to about eighteen months — that covers a gap until a defined take-out: a sale, a refinance, or a larger sanction. Priced for speed rather than economy. The right tool exactly when timing is worth more than rate.

Mezzanine Debt

A layer between senior debt and equity: subordinated, higher-priced at roughly 15–20%+ in India, sometimes with equity-linked upside. Used when senior lenders are full but promoters won't dilute — more expensive money that avoids selling shares.

Structured Debt

Any facility shaped to the deal rather than the product sheet: moratoriums, bullet repayments, cash-flow-linked instalments, multiple securities. The craft is matching repayment to how the business actually earns.

NCD (Non-Convertible Debenture)

A bond a company issues to raise debt, bought by funds and institutions, secured or unsecured, and never convertible into equity. The instrument behind much AIF and private credit lending in India.

Sanction Letter

The lender's formal approval: amount, rate, tenor, security, covenants, and conditions. It is an offer, not money — disbursement follows documentation and security creation, and the terms in it remain negotiable until you sign.

LTV (Loan-to-Value)

The loan as a percentage of the security's market value. A ₹60 crore loan on a ₹100 crore property is 60% LTV. Indian LAP typically runs 55–75%; construction finance is sized against project cost, not end value.

DSCR (Debt Service Coverage Ratio)

Cash available for debt service divided by the year's interest plus principal. Lenders want it comfortably above 1 — usually 1.2–1.5×. It answers the only question that ultimately matters: can the business pay from operations?

Personal Guarantee

A promoter's personal promise to repay if the company can't, making personal assets reachable. Near-universal in Indian mid-market lending; scope, caps, and release triggers are negotiable and worth negotiating. Full guide: personal guarantees in business loans.

Pacewell Capital is a debt advisory and arranger, not a lender. Rates, loan-to-value ratios, and other figures on this page are indicative market ranges as of July 2026, provided for explanation only, and are not offers or commitments.