The tenor of a loan is the period of the loan – e.g. 1 year, 5 years or 10 years. This is how the investment world refers to the period for which their clients’ capital is tied up in loans.
Each fund manager will have very specific tenor restrictions based on the investment period offered to investors. For example, a Trade Finance fund manager will usually be restricted to not finance any trade longer than 180 days, which means that the client investing the capital can technically withdraw their money after 180 days. They never withdraw in our experience, but the fact that it’s legally possible is important for the fund manager’s compliance with commitments made long before they met you. Property Finance funds, for example, have much longer time limits because their investors have committed to longer term secured investments of 5 years or more. As a general rule, investors value flexibility, so shorter tenor is more desirable than longer tenor.
The important thing to remember is that tenor limits are cast in stone. They are to be understood, not negotiated. Any violation of tenor limitations will lead to an instant decline of your finance application. A good fund manager will provide those limits in advance to prevent wasting your or their time. You are then free to find a fund whose tenor limits match your business cycle.