How Leveraging a Business Term Loan Can Help Your Business: Everything You Should Know About a Business Term Loan

Are you thinking about expanding your business, looking to purchase inventory for your e-commerce site, seeking a way to fund a project your company has successfully bid on, or needing to cover a cash flow shortage? A business-term loan might be the answer.

A term loan allows you to obtain the fixed capital you need and repay it with interest over a fixed period. Depending on the terms of your loan, you can make daily, weekly, or monthly payments.

As a business owner, you might have two questions right now:

1. How can leveraging a business term loan help my business?
2. What should I know about a business term loan?

This post will answer these and other questions.

What Is a Business Term Loan?

A business term loan is a lump sum borrowed from a lender like a bank, credit union, or online non-bank lender like The Payment HQ. Depending on the lender, the funding can range from $5,000 to $10 million.

The capital infusion is debt financing, not private equity, so there’s no question of ownership involved in the transaction. You receive the money and maintain control of your company, although there are financial risks for late payments or defaults on the loan.

Term loans are among the least expensive means of business financing and can be used for many purposes, including:

• Expanding a business
• Renovating an office space
• Purchasing inventory
• Buying equipment
• Hiring employees
• Refinancing existing debt
• Financing capital projects

This is just a short list of possible uses. You may find many others for your company.

Types of Term Loans

There are three types of business term loans. You’ll need to review your company’s needs to determine which one is right for you.

The three types of term loans are as follows:

• Short-Term Loans: Used in situations where you might have a pretty quick return on investment; higher interest rates and larger payments; repayment periods usually 18 months or less; daily or weekly repayments
• Intermediate or Medium-Term Loans: Stricter requirements to qualify; lower interest rates; repayment periods from one to three years; weekly or monthly repayments
• Long-Term Loans: Most challenging to qualify and slower to fund; low-interest rates; long repayment periods of more than three years; monthly payments

You’ll typically receive a bank or credit union loan in 30–60 days, while online lenders can often fund your loan in as little as 24 hours.

How to Qualify

To qualify for a business term loan, you must have a business credit score of 700 or higher, $500,000 in annual revenue, and two years of earnings on record. While it can be hard to get financed, those businesses that are able to will benefit from low-interest rates.

Many non-bank lenders have lower minimums regarding credit scores and revenue. However, most still require you to have been in business for at least two years.

Consider a Loan for Your Business

While they can be challenging to secure in some cases, business term loans can be a straightforward option for financing needs within your company. Have any questions or comments? Contact us now to get started on your business term loan.