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. Many people will consider saving for several months or years to get the money they need. 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. One option that will give you the capital you need is term loans. Terms loans have specific amounts and a determined repayment schedule. The rate of interest could be fixed or floating.
Terms loans are mainly used for purchasing equipment, inventory, and real estate. Term loans could also be used for monthly expenses. However, many terms are secured and you will, therefore, need collateral for the loan. You will need to use a property to guarantee 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.
Term loans would have varying 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.
Term loans can be classified into different categories. Depending on your business, you can choose the more appropriate one. 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. When a business wants to expand or grow its service, medium term loans are more ideal. For instance, when a business wants to expand its market reach or access more customers, medium term loans would be a good option.
Long term loans are, however, designed businesses that are well established and need to make huge investments and limited repayments. While the repayment amounts will be lower, you will pay more over the loan period. The repayment period for long term loans is 10-25 years. It is, however, important that you talk to a financial advisor before taking a term loan.