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A Guide On Business Term Loans and Business Loan Terms

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Title: A Guide On Business Term Loans and Business Loan Terms


1
  • A GUIDE ON
  • BUSINESS TERM LOANS BUSINESS LOAN TERMS
  • www.onlinecheck.com

2
  • What is a Business Term Loan?
  • Everyone loves a classic because its tested
    and itll work considerably. Its the same with a
    business term loan a steady, flexible way to get
    a lump sum of capital to repay in regular monthly
    repayments at a fixed interest rate helping you
    grow your business, and build credit.

The term in a business term loan is set
repayment term length of one to five years. The
maximum loan amount you can secure with a term
loan is up to 500K with typical interest rates
of 7 to 30 in as quick as two business days.
A business term loan offers many benefits
including fixed payment structure, available for
almost any business purposes, lower monthly
payments and longer payments terms than
short-term loans. The only drawback is the
possible prepayment penalties. If youre in
business for some time and have a good credit
score and generating revenue, youre a solid
contender of a traditional term loan. Not all
business term loans are the same, nevertheless,
the term length, loan size and interest rates is
depends on your business revenues and credit
rating.
www.onlinecheck.com
3
The following is required to qualify for business
term loans
  • Requirements for Business Term Loans

Employer Identification Number (EIN)
Business term loans are traditionally a bank
product that involves longer application process
with a lot of paperwork. With the advancement in
lending industry, various online lenders have
emerged, like Lending Club and Funding Circle
that are offering business term loans at
reasonable rates via quick online applications
and process.
Business Plan
Bank Statements
Financial Statements
Credit Score
Business and Personal Tax Returns
Personal Debt-To-Credit Ratio
Potential Collateral
Loan Purpose
Business Debt Schedule
  • www.onlinecheck.com

4
  • How Do Business Term Loans Work?
  • You can always use some extra cash whether its
    for working capital, equipment purchase or new
    hire. But getting financing that your business
    can afford is the real deal. Here is everything
    you need to know about how term loans work and
    what youll need to qualify.

www.onlinecheck.com
5
  • The Essentials of Term Loans

A term loan is a common type of business loans
where you get predetermined funds with a fixed or
variable interest rate with repayment terms of
regular monthly installments. Based on your
businesss growth, capital requirements, credit
rating, cash flow, and revenue, there are
different types of term loans available.
Actually, you can get a business term loan with
term lengths and payment structures as varied as
1 to 5 years with daily and monthly paymentsand
everything in between. Likewise, you can get
varied loan amounts and interest rates at higher
or lower rates as per your businesss needs and
history. The traditional business term loan
structure will always stays the same, whereas the
definite details of your term loan based on your
businesss financials. Qualifying for
traditional business term loans from banks and
specific alternative lenders is hard, especially
when you dont have collateral and a low credit
score. Actually, collateral is the major
requirement for a term loan. While many lenders
might not require collateral but, in its place,
put a blanket lien on your business, the same
risk still applies. Before applying for a
business term loan, ask lender for any prepayment
penalties or other fees involved. Review the
exact terms with the lender so you can figure out
affordable monthly repayments.
  • www.onlinecheck.com

6
  • When Should You Use a Term Loan?

A term loan can be used for almost any business
purpose including equipment upgrades, inventory
purchase, refinancing other debts, tax or
payroll, or simple working capital to help you
through the hard times.
If a term loan is used properly, it can help your
business grows beyond your boardersadding new
products, services, locations, or marketing
campaigns into your toolbox.
With the predictable nature of term loans, you
can assess how it will influence your business
overall. The key is to discern the calculations
earlier and create spending strategy for the
coming months or years.
www.onlinecheck.com
7
  • What is a Short-Term Business Loan?

Short-term business loans are lump sum cash that
are designed to finance short-term needs with
repayment terms from 3 months to 18 months. They
loans can be used to manage cash flow, cover
unexpected expense, pay off existing debt or
leverage a business opportunity.
A short-term loan offers many benefits including
fixed payment structure, suitable for many
business purposes, with limited paperwork and bad
credit is accepted. The drawbacks include the
higher annual costs than long-term loans and
weekly payments for businesses generating
sporadic revenue.
The maximum loan amount you can secure with a
short-term loan is up to 250K for terms up to 18
months with typical interest rates starting at
10 in as quick as 24 hours.
  • www.onlinecheck.com

8
Who Qualifies for Short-Term Loans?
Short-term lenders focus more on business cash
flow. A strong business cash flow can sometimes
prevail other financial factors in loan
qualification criteria. The loan amount and
interest rate will depend on your annual revenue,
business history, and personal credit rating.
Short-term business loans are typically applied
online making the loan application process faster
and easier.
www.onlinecheck.com
9
  • The following is required to qualify for
    short-term loans
  • www.onlinecheck.com

10
  • How Do Short-Term Business Loans Work?

Every business needs quick access to capital
every now and then. But do you actually obtain
financing that fast? Merchant Advisors assists
small business owners secure working capital that
directly deposited into your bank account
immediately.
  • www.onlinecheck.com

11
The Essentials of Short-Term Loans
Short-term loans work similar to traditional term
loans where youll receive upfront cash that you
repay over a predetermined period of time with
lenders fees and interest. Due to smaller loan
amounts, the repayment period is shorter with
higher interest rates, and you often pay back on
a daily or weekly basis instead of a monthly
schedule. On the contrary, theyre easier to
apply and qualify for, with quick funding. One
thing to remember, short-term loans are among the
expensive loan products available to small
businesses.
Quick application process and fast access to
capital makes short-term business loans riskier
for the lender. Because of lower amounts and
repayment terms, they typically carry higher
interest rates. Above all, short-term loans make
most sense for businesses, since the best loan is
always the lowest-cost loan.
www.onlinecheck.com
12
  • When Should You Use a Short-Term Loan?

Actually, every business requires capital every
often and then and in such cases, a short-term
loan is the ideal financial solution.
One must start out with money to make more money
making quick access to working capital a game
changer for almost any businesswhether youre a
startup or planning to expand.
With a short-term loan, you can fund expansion,
refinance other short-term debts, repay taxes,
leverage new opportunities, or fulfill more or
less any short-term financing need.
  • www.onlinecheck.com

13
The Most Common Business Loan Repayment Terms
Lets review the repayment term lengths of the
most common types of business loans. The term
in this context means the predetermined period
within which the borrower has to pay back the
loan, with lenders interests and fees.
Business Lines of Credit
SBA Loans
Medium-Term Business Loans
Traditional Bank Loans
Merchant Cash Advance
Invoice Financing
Equipment Financing
Short-Term Business Loans
www.onlinecheck.com
14
SBA loans have the longest repayment terms in the
industry ranging from 5 year to 25 years. The
term of SBA loans depends on the SBA loan
program. The most popular SBA 7(a) Loan Program
has a term of 5-25 years, following SBA CDC/504
Loan with terms of 10-25 years and SBA Microloan
with terms of less than 6 years.
Traditional bank loans are the second business
loan type offering longest terms from 3 to 10
years. With that said, these loans are harder to
qualify for as well.
www.onlinecheck.com
15
Medium term-loans function like traditional bank
loans and offer relatively lengthy business loan
terms. These loans can be secured via alternative
lenders with terms from 1 year to five years,
with longer repayment terms than many other
online business loan products.
Business lines of credit offer terms from 6
months to 5 years and can be either short-term or
medium-term in nature.
www.onlinecheck.com
16
Invoice financing is a short-term financing
solution that allows business owners to access
cash secured against their outstanding invoices.
The loan term based on the time the invoiced
customer takes to pay off the invoice. They
typically have loan terms of three to six months.
Equipment financing is another financing product
where equipment is purchased and serve as
collateral for the financing. The built-in
collateral makes it less risky for lenders,
allowing them to offer longer terms from two to
five years long.
www.onlinecheck.com
17
Short-term loans are determined by their
repayment terms of a year or less. However,
lenders typically offer repayment terms of three
to eighteen months on short-term loans.
Because of unique nature of merchant cash advance
repayment, the loan term is undetermined. These
advances are repaid via businesss daily
credit/debit card sales, and since the daily
payment will vary, theres no determination of
how long repayments will take. Although, the
daily payments are so recurrent, most borrowers
will typically repay merchant cash advances in 4
to 18 months.
www.onlinecheck.com
18
THE BOTTOM LINE
Its all about the timing and your needs. If
youre in dire need of quick capital, a
short-term loan can be a better financing
solution. On the contrary, long-term loans takes
time to secure, in contrast with 24 hours it can
take to get cash from a short-term loan.
  • Every loan has its own features and eligibility
    criteria. Some needs short quick solution in
    terms of short-term loans, whereas some ask for
    longer repayment terms. Typically, long-term
    loans are more favorable than short-term loan
    because of larger loan amount, lower interest
    rates, and longer repayment terms. Not to
    mention, long-term business loans are hard to
    qualify for than short-term business loans.

Eventually, the best business loan is the one
that actually helps your small business grow and
succeed.
www.onlinecheck.com
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