As a small business owner, you may need to secure additional financing to grow your business or cover unexpected expenses. One option to consider is a business-term loan. In this blog post, we will explore what a business term loan is, the types of loans available, the benefits of using a business term loan, how to apply for one and some considerations to keep in mind.
What is a Business Term Loan?
A business term loan is a type of loan that is paid back over a set period, typically between one and ten years. The loan amount, interest rate and repayment terms are determined at the time of application. Business-term loans often fund long-term investments, such as equipment purchases, real estate or other major business expenses.
Types of Business Term Loans
There are several types of business term loans to consider, including:
- Traditional bank loans
These are loans provided by traditional banks and financial institutions. They typically have a longer repayment term and lower interest rates.
- Online lenders
Online lenders offer quick and easy access to funding, often with less stringent requirements than traditional banks. However, they may have higher interest rates and shorter repayment terms.
- SBA loans
The Small Business Administration offers a variety of loan programs to small businesses, including long-term, low-interest loans.
Benefits of Using a Business Term Loan for Financing
Here are three benefits of using a business term loan for financing:
- Predictable payments
Business term loans have fixed interest rates and monthly payments, which makes it easier to budget and plan for expenses.
- Longer repayment terms
Business term loans typically have longer repayment terms than other loans, making payments more affordable.
- Builds credit
By making timely payments on your business term loan, you can improve your credit score, making it easier to secure financing in the future.
How to Apply for a Business Term Loan?
Here are some steps to follow when applying for a business term loan:
- Determine how much you need to borrow and what you will use the funds for.
- Gather financial documents, such as tax returns, bank statements and financial statements.
- Research and compare lenders to find the best terms and rates.
- Fill out the application and provide all necessary documentation.
- Wait for approval and funding.
Consider Your Options
Before applying for a business term loan, it’s essential to consider your options. Some things to keep in mind include the following:
- Interest rates and fees: Ensure you understand the interest rates and costs associated with the loan.
- Repayment terms: Consider the length of the repayment term and whether it’s feasible for your business.
- Eligibility requirements: Ensure you meet the lender’s eligibility requirements before applying.
Get Help with Securing Your Business Term Loan with EDC!
A business term loan can be valuable for small business owners seeking financing. By understanding the types of loans available, the benefits of using a business term loan and how to apply for one, you can make an informed decision for your business’s financial needs.
Suppose you need help navigating the process of securing a business term loan. Contact us today at Economic Development Collaborative for resources and support. Our experts can help you find the right loan and lender for your business.