Pros and Cons of a Business Term Loan
- Flexible uses
- Preset, predictable payments make budgeting easier and helps smooth cash flow
- May get lower interest rates than other forms of business credit
- Making repayments as agreed can help establish/rebuild business credit
- Quick access to money
- Unsecured business term loans mean no personal guarantee or collateral required
- May qualify for lower rates with collateral or good credit
- Depending on your terms you could have a longer repayment period
- Once the loan has been paid off you can’t access that money anymore
- Might be difficult to qualify for it
- If you pay it off early you might face prepayment penalties
Business Term Loans Compared To…
What’s the difference between Business Term Loans and Business Credit Lines?
Businesses use term loans and credit lines to help finance their businesses, yet they have some pretty significant differences.
With a term loan, you receive a lump sum of money all at once and start getting charged interest as soon as you receive the loan money. As you make regular payments, your loan balance, or the money you owe, decreases. And then once the loan has been paid off, your loan agreement ends.
With a business credit line, on the other hand, you get what is known as revolving credit. This means, that like a business credit card, borrowers get approved to borrow up to a preset limit.
You can borrow up to that limit at any time. Borrowers only get charged interest on the amount borrowed. You pay down the balance owing and can access your credit line again, and again, up to the agreed-upon limit.
Credit lines might cost more than a fixed rate business term loan. And you could find it more difficult to qualify for a credit line if you have bad credit or no credit.
Another key difference between business loans and business lines of credit is how payments work. With most loans, you’ll pay the same amount every payment. So your payment is predictable and easy to work into a regular budget.
With a credit line, your payment depends on the outstanding balance. Depending on the terms of your business credit line agreement, your payment could get based on a percentage of the outstanding balance, or simply be an “interest-only” payment.
Compared to other loan types
|Loan types||Max Amounts||Rates||Speed|
|Merchant Cash Advance||$7.5k – $1m||Starting at 1.09||1-2 business days|
|SBA Loan||$50k-$10m||Starting at 5%||3-5 weeks|
|Business Term Loan||$10k to $5m||Starting at 5%||1-3 business days|
|Business Line of Credit||$10k to $250k||Starting at 8%||1-3 business days|
|Receivables/Invoice Factoring||$50k-$10m||Starting at 5.8%||1-2 weeks|
|Equipment Financing||Up to $5m per piece||Starting at 5%||3-10 business days|
|Revenue Based Business Loans||$10K – $5m||Starting at 9%||1-3 business days|
It’s always great to have options. With online credit opportunities, you can apply for all sorts of small business loans that fit your specific needs. However, these online options don’t always give you the simplicity that you need. Sometimes, you just need to keep it simple, but you don’t want to deal with the bank. With United Capital Source, you can have the best of both worlds. Not all credit sources offer a simple business term loan, but our network of lenders do. If a business term loan is the right choice for you, then contact us. Not sure if you need a term loan or another option? Don’t worry. We’ll help you find the type of financing that will work best for you and your business.
United Capital Source
Ready to invest in your own business? Then we’re ready to help get your business the term loan it needs. At United Capital Source, we want to help your business thrive. Start your online application with us today. Also, please feel free to give us a call, shoot us an email, or start an online chat. We look forward to working with you!