It feels great when you own a business but capital will be required to grow and sustain 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. Since there are financing options available, you don’t have to wait for years to get the money you need.
Unlike some years back, businesses have many financing options today. There many lenders who are willing to provide funding for businesses. One financing option that can give you fund you need is term loans. Terms loans come with specific loan amounts, as well as set repayment schedules. The rate of interest could be fixed or floating.
Many businesses will use term loans to buy inventory, equipment, and real estate. Businesses can also use term loans to support their month-to-months operations. However, many terms are secured and you will, therefore, need collateral for the loan. The property used as collateral would act as a 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.
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. You should, therefore, consider the length of a term loan. Rather than focus on the amount you owe, higher repayment might mean less interest.
There are different types of term loans. 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. They are more ideal when you need a short-term investment with immediate return. If you want a fast loan repayment and minimize the interest, short term loans would be perfect.
In the case of medium term loans, the duration is 2-5 years. These loans are more appropriate when you want to expand your services. For example, when you want to reach new customers or market, medium term loans can be perfect.
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 duration is 10-25 years. It is, however, important that you talk to a financial advisor before taking a term loan.