It feels great when you own a business but capital will be required to grow and sustain your business. For example, you will might more inventory, new equipment, payroll support, and a new location. For some people, saving will be the option to raise the capital they need. Getting funding can help you receive the money you need today instead of waiting for months or years.
Unlike some years back, businesses have many financing options today. Many lenders are now willing to fund businesses. A term loan is an option that can help you get the funding you need. Terms loans have specific amounts and a determined repayment schedule. The rate of interest could be fixed or floating.
Terms loans are mainly used for purchasing equipment, inventory, and real estate. Term loans could also be used for monthly expenses. A security will be needed for a term loan in most cases. The collateral or property used will be the guarantee for the loan. In case you fail to repay the loan, the lender would take the property used as collateral. For new and businesses that lack established credit, secured term loans would be a good option.
Term loans would have varying repayment periods. There are term loans with a length of 12 months and others have a longer repayment period of 25 years. Therefore, you should consider the length of the loan when taking a term loan. You should not just look at the total amount you owe because higher repayment would result in lower interest.
Term loans would be divided into different options. Therefore, you need to consider the most appropriate term loan for your business. Term loans can be short, medium, or long term loans. Short term loans have a length of 3-12 months. This loan type would be ideal when you need to make a short-term investment that will give an immediate return. In case you need a fast repayment to minimize the interest, they would be a good option.
Medium term loans have a length of 2-5 years. When a business wants to expand or grow its service, medium term loans are more ideal. For instance, when a business wants to expand its market reach or access more customers, medium term loans would be a good option.
The long term loans, on the other hand, are designed for established businesses that want to make major investments and limit their repayments. The repayment amount is lower but you will have paid more over the length of the loan. The repayment period for long term loans is 10-25 years. It is, however, important that you talk to a financial advisor before taking a term loan.