Owning a business comes with so much excitement but you need capital for sustained growth and to expand the business. Some of the things that will need capital are such as new equipment, new location, supporting payroll, and more inventory. Some people opt to save for several years or months to get the capital. Since there are financing options available, you don’t have to wait for years to get the money you need.
These days, businesses have access to many financing options unlike several years back. There are a variety of lenders who want to extend their services to 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.
In most cases, businesses will use term loans for real estate, inventory, or equipment. Businesses can also use term loans to support their month-to-months operations. A security will be needed for a term loan in most cases. The property used as collateral would act as a 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.
On the other hand, term loans have various repayment periods. Some loans might have a repayment period of 12 months while others have a length of 25 years. The repayment period is, therefore, worth considering. You should not just look at the total amount you owe because higher repayment would result in lower interest.
There are different types of term loans. You can, therefore, choose the term loan that is more appropriate for your business. They can be short term loans, medium term loans, and long term loans. The repayment duration for short term loans is 3-12 months. Short term loans are a good option when a short-term investment is needed but the return is immediate. They are also suitable when you need to repay the loan fast and lower the interest.
In the case of medium term loans, the duration is 2-5 years. They are ideal when a business is looking to grow and expand its services. 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. They have a length of 10-25 years. Involving a financial advisor would great when applying for a term loan.