Term Loans

These fast loans can provide your business with ready cash that you pay back over a short period

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Term Loans Business Funding

If you are looking for funding for long-term growth, perhaps the purchase of new premises or a piece of equipment, a term loan could be the answer for you. The advantages of a term loan are that you have a fixed repayment structure which enables you to plan in advance how you will repay the loan. This type of funding will suit established businesses who already have good accounts for a couple of years and can project healthy growth over the coming years.

What is a term loan?

A term loan is essentially a loan that is repaid over a fixed schedule, typically with a fixed or floating interest rate. Most banks offer term loans to businesses that need the capital for typical business expenses, or to purchase equipment and services that can help them grow. However, a bank may take 3 months to process your application, which could slow down your progress.

Term loans require collateral and often have strict approval processes in order to reduce the risk of default. A term loan is most suitable for businesses that need the extra capital to grow and already have a good financial track record.

How do term loans work?

Term loans work similarly to most other types of business loan. You receive the lump sum of money you’ve requested upfront, and any fees charged by the lender are also paid. You will then need to repay the loan in full amount over the full period of your term including any interest that you have agreed upon. For larger loans, collateral will be required such as company assets.

What’s the process of acquiring a term loan?

Applying for a term loan is simple and if you need it fast then avoid the banks, who will have a very lengthy application process. You will need to supply your lender with 2 years’ worth of healthy accounts. Depending on your situation, you may need to provide them with proof of personal or business owned collateral as a guarantee.

Some lenders won’t quote the APR during initial discussions, so it’s important to question them about all the details to ensure that you’re fully aware of all the fees and other costs associated with your term loan.

As with all types of business funding, there are various advantages and disadvantages of Term Loans:

Advantages

  • Term loans typically come with low, fixed interest rates
  • You have fixed predictable payments every month
  • Term Loans can be set up quickly
  • It improves your company’s credit history, opening up more opportunities in the future
  • You can use the money for a variety of purposes
  • There are flexible terms based on what you need the money for

Disadvantages

  • You often need to put collateral on the line, meaning you could be putting your business or personal assets at risk if you fail to repay it
  • You need a good financial record to be able to apply for a term loan – not suitable for a start-up business.
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Frequently asked questions about term loans

If you have a good credit and financial history with your business, as well as some collateral to future proof the repayments you will most likely be accepted.

Term loans should ideally be used for the growth of your business. If you require a loan to pay for regular business expenses, then your company is likely having issues with its cash flow and there are deeper issues that need to be solved. A term loan could fix this if used correctly, but it’s best to avoid using a term loan for anything other than business growth.

Term loans can be used to purchase more inventory or equipment, it can be used to upgrade software and hardware solutions, it can be used to purchase the commercial real estate for expansion, it can be used for refinancing, and it can also be used for acquiring other businesses to work under your brand. These are just a few common examples.

Most likely, yes and it’s always a good idea to be truthful.

In most cases, collateral used for a term loan will be business assets such as property, hardware, inventory, invoices or guarantees.

Term Loans For Your Business

If you’re looking for a funding option with a structured repayment system, a term loan could be right for you.

For more information on term loans or any other type of funding available for your business, give one of our friendly team a call today on 0800 047 2389 or fill out our contact form and we’ll get back to you.