While owning a business is great, you will need capital to sustain growth and expand your business. For example, you will might more inventory, new equipment, payroll support, and a new location. 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.
Unlike some years back, businesses have many financing options today. There many lenders who are willing to provide funding for businesses. One option that will give you the capital you need is term loans. These loans have set repayment schedules and specific amounts. 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. In most cases, however, term loans will need collateral as a security for the loan. You will need to use a property to guarantee the loan. In case you fail to repay the loan, the lender would take the property used as collateral. For new businesses or those that lack an established credit, collateral would be required.
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. Rather than focus on the amount you owe, higher repayment might mean less interest.
There are different types of term loans. You can, therefore, choose the term loan that is more appropriate for your business. Term loans can be short, medium, or long term loans. Short term loans have a length of 3-12 months. Short term loans are a good option when a short-term investment is needed but the return is immediate. In case you need a fast repayment to minimize the interest, they would be a good option.
Medium term loans have a length of 2-5 years. They are ideal when a business is looking to grow and expand its services. For example, when you want to reach new customers or market, medium term loans can be perfect.
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. They have a length of 10-25 years. Before you take a term loan, consider talking to a financial advisor.