While owning a business is great, you will need capital to sustain growth and expand your 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. But rather than wait for months or years, financing can help you get what you want today.
Today, unlike some time back, there are a variety of financing options for businesses. There are a variety of lenders who want to extend their services to businesses. One option that will give you the capital you need is term loans. Terms loans come with specific loan amounts, as well as set repayment schedules. Also, the interest rate could be floating or fixed.
Terms loans are mainly used for purchasing equipment, inventory, and real estate. 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 collateral or property used will be the guarantee for the loan. When you fail to pay the loan back, the property is used to recover the loan balance. For new and businesses that lack established credit, secured term loans would be a good option.
There are different repayment periods for term loans. For instance, some loans have a duration of 12 months and others could be repaid over 25 years. The repayment period is, therefore, worth considering. It is not just the total amount that is important since making higher repayment would mean lower interest.
Term loans would be divided into different options. 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. They are more ideal when you need a short-term investment with immediate return. They are also suitable when you need to repay the loan fast and lower the interest.
Medium term loans have a length of 2-5 years. These loans are more appropriate when you want to expand your 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. The repayment period for long term loans is 10-25 years. Before you take a term loan, consider talking to a financial advisor.