The right type of business loan can propel your company to new heights. Conversely, the wrong decision has the potential to bog down your finances, hamper growth, and even lead you to close your doors for good.
Although there are nearly 20 different types of business financing, a term loan often makes the most sense. Not only is it the most common, but it also suits the needs of the largest number of businesses.
With a term loan, you receive a lump sum of cash upon agreeing to the terms and conditions. You’re then required to repay the balance, along with interest, over the agreed upon term.
Benefits of a Term Business Loan
Both online lenders and traditional financial institutions offer term loans to companies of all sizes, spanning every possible industry.
Some of the most powerful benefits of a term business loan include:
- Borrowing amounts typically range from $10,000 to $1 million +, allowing you to secure just the right amount of money.
- All the cash you need upfront, allowing you to immediately put the funds to work.
- Fast funding, especially if you opt to use an online lender. Depending on the circumstances and lender, it’s not out of the question to receive funding within a few days of applying.
- Variety of terms, generally ranging from 12 to 84 months.
Are There Any Drawbacks?
As with any type of business loan, there are some potential drawbacks to think about before signing on the dotted line:
- May require collateral, such as business equipment or real estate
- Variety of fees, such as an origination fee (approximately two percent of the amount you’re borrowing)
Should You Make Your Move?
The more you learn about term loans and business financing in general, the easier it becomes to make an informed decision on what to do next.
Here are some details to consider:
- Your business is looking to expand: Term loans are the perfect fit for expansion for two reasons: you can borrow just what you need, and you’ll know exactly how much you have to pay each month to stay current.
- You have good or excellent credit: Lenders are most interested in business owners with a high personal credit score. Just the same, if you also have a strong business credit score, it’ll work in your favor.
- You’re in a hurry: There’s nothing worse than needing money now, but finding that you have to wait for the application process to slowly unfold. Term loans are often funded within two to three business days, thus eliminating the wait time almost altogether.
Your business has many options in regards to financing. Maybe you have all the money you need in the bank. Or maybe you can turn to friends and family for funding. Perhaps it makes the most sense to use a business credit card.
But, even though there are benefits associated with every type of financing, term loans remain the most popular choice.