What Is A Business Term Loan?
A business term loan is very easy to understand. The borrower gets a lump sum of money that is paid back, plus interest, over a fixed period of time. Payments can be made on a variety of frequencies (monthly, bi-weekly, daily etc.) and are lower than payments for short term business loans. This is because business term loans are usually paid back over a number of years, whereas most short term business loans are due in just a few months. And unlike other types of small business loans, payments for business term loans are usually fixed and will begin almost immediately after you receive funding. You pay the same amount back at the same frequency. United Capital Source, however, may be able to alter your payment amount or frequency during the repayment process to prevent damage to cash flow.
Interest rates are generally fixed for these types of programs. Like several other terms of your business term loan, interest depends on a variety of factors. Your business’s cash flow, revenue, credit rating, and financial needs can all play a role in the amount and terms of your business term loan. The beauty of working with United Capital Source is that in most cases, our terms are up for negotiation. We may be willing to customize your borrowing amount, interest rate, due date, and payment frequency to ensure you do not have to repeatedly dig into personal or operational funding to make regular payments.
What Do I Need A Business Term Loan For?
Business term loans are best suited for long-term investments that are expensive and highly lucrative. In this situation, payments would be low and easily offset by the boost in revenue that comes from your desired investment.
Examples of long-term investments include securing new equipment, launching a marketing campaign, adding new property, or purchasing inventory for the upcoming season. These investments might not directly contribute to your revenue stream for several months but their returns are worth the wait. In other words, the kind of investment that warrants a business term loan should only be pursued if you are certain your business has generated enough demand to offset its cost. Ideally, a substantial boost in revenue will not be the only reward of using a business term loan to grow your business. Your revenue would increase more and more over time, as opposed to the temporary boost that might come from a short term business loan.
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Business term loans can also help you increase your credit score more effectively than most other business funding programs. Just a few regular payments will raise your credit score and overshadow bad credit history. Once the business term loan is paid back in full, you will most likely become eligible for a second round of funding with more favorable terms. This could very well be a vital move for businesses looking to maintain the momentum they received from their first business term loan. Apply now to see how much you qualify for!