Business Term Loans
Types of Business Term Loans
Term loans are generally categorized by their repayment period:
Short-Term Loans
(6 months to 2 years) typically have faster funding times and less strict eligibility requirements, but often higher interest rates and more frequent payments.
Medium-Term Loans
(2 to 5 years) offer a balance between interest rates and qualification requirements.
Long-Term Loans
(5+ years, up to 25 years for real estate) provide large sums of capital with lower interest rates and smaller monthly payments, but require stricter qualification criteria and longer approval processes.
Main Features
Lump Sum Funding
The full loan amount is disbursed upfront.
Set Repayment Schedule
Payments (typically monthly, but sometimes weekly or daily for short-term options) are fixed and predictable, making budgeting easier.
Interest Rates
Rates can be fixed or variable, but are often fixed for the life of the loan, especially for long-term options.
Collateral
Some term loans, particularly those for large amounts or long terms from traditional banks, may require collateral, such as a lien on business assets or real estate.
Lenders assess creditworthiness based on several factors, including the business's time in operation, credit scores (personal and business), and annual revenue. Generally, well-established businesses with strong financials have better chances of securing favorable terms.
