What are Term Loans?
A term loan refers to a loan that is collected from a bank, credit union or any traditional financial lending institution, with an interest rate which could be fixed or variable and is payable within a specific time frame.
Term loans are necessary for most small businesses to own fixed assets such as equipment for its production process as well as to expand and improve their businesses. It is worth noting that one major source of business financing are traditional term loans.
Term loans are necessary to finance any business purpose including additional cash to working capital, purchase of inventory or equipment, buying of real estates and refinancing of previous or existing debts.
The Benefits of getting Term Loans
It is true that some term loans may have prepayment penalties but term loans have certain features that makes financing your business through it a good option. These features may include
- A predefined payment structure
- Lower monthly payments as compared to short-term loans
- Longer payment duration as compared to short-term loans
- How to Qualify for a Term Loan
- How Term Loans Work?
- How to Apply for a Term Loan
- Term Loans –What Will It Cost You?
How to Qualify for a Term Loan
It is very easy to qualify for a term loan. In fact, anyone is eligible for a term loan as long as you are not just starting up a business. It is also important that you have a steady cash flow as you will need to service the loan you have requested for.
Most traditional lending institutions including banks and credit unions will require that you have a good credit score to qualify with them. Your credit score is only needed to give you a better plan that will suit your budget.
How Term Loans Work?
The importance of extra cash in a business cannot be overlooked. Term loans provide such extra cash as is needed by any business to thrive well.
Term loans can come in different ways however; it is majorly dependent on the kind of business, credit rating and revenue. There are term loans with longer durations of five years and above payable monthly and those with shorter durations of less than a year, payable daily.
The nature of your business is also an index in the loan amount you can qualify for as well as the interest rate that should be accorded you.
Depending on your business financials, a good credit score and collateral is needed to gain access to term loans. You also stand a chance of losing the collateral when you default or fail to repay.
Some lenders will also prefer to place a blanket lien on your business where there is no collateral and you face greater risk of losing your business.
How to Apply for a Term Loan
When you try to get a term loan from other traditional financial lending institutions, you get to face certain dilly-dallying which has been totally exonerated when you work with us.
You are sure to get term loans at highly competitive and affordable rates. Certain stipulations will be required of you. They include:
- A valid driver’s license
- Bank statements
- Profit and loss statements
- Voided business check
- Business and personal tax returns
- Balance sheet
- Credit score
How Term Loans Work?
You should not be eager to get a term loan that you forget to thoroughly read through the loan terms. A thorough perusal of the terms ensure that you do not get any surprised hidden fees such as packaging fees, prepayment fees, origination fees, etc.
There is also a need to know the overall cost of the loan so that you can draft out a plan that fits into your revenue and financial plan before receiving a business financing.
It is important you ask for a better explanation from the lender how the payment schedule will be like in details so as you can understand how loan durations and interest rates eventually affects the total cost of your loan.