Term Loan – Short Term Loans vs. Long Term Loans
Sometimes your business needs an infusion of working capital funding to help expand and sustain growth. You may need new equipment, increased inventory, a new location, or money to support an increase in payroll. Either way, Your FundingTree can help you achieve your goals by offering the best term loan and installment loans available!
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Instead of saving money for months or years to get what you need, you can renovate your office, upgrade equipment, and refinance your existing debt today. All you have to do is fill out a quick 90-second online application to find the best funding option for your business. You can receive offers from several lenders that compete for your business. Let’s look at term loans and how we can help you!
What is a Term Loan?
In essence, a term loan is a loan for a specific amount that has a set repayment schedule. You’ll either have a fixed interest or floating interest when you pay it back. Floating interest means that your interest rate will vary based on the market. Fixed interest means that your interest will stay the same for the life of your loan.
Most businesses use these loans for equipment, real estate, or inventory, but sometimes businesses use these loans to support themselves month-to-month.
You most likely will need to use collateral to get a loan. These loans are known as secured loans and require some form of property to guarantee repayment. If you fail to repay the loan, you lose the collateral. This form of loan is typically for new businesses or businesses without established credit.
Typical Repayment Terms
When taking out a loan, you should pay attention to the length of time you’ll have to repay it. Don’t only focus on the amount of the payment that you’ll owe when you take out the loan. Sometimes it’s better to make higher payments because you’ll pay less interest.
Traditionally, term loans have had a length of two to five years, but now there are more options than ever. Some loans will allow you to pay back the loan over the course of 25 years while others have payment terms of 12 months.
There are benefits to each type of loan duration and structure depending on your needs.
Short Term Loans
These loans can be anywhere from 3-12 months. Sometimes you may need money for a short-term investment that will see an immediate return. Other times, you need an infusion of cash and don’t want to pay a lot of interest. If you’re looking to repay a loan as fast as possible and limit the interest you pay, short-term loans are a great solution.
Sometimes these loans want you to make weekly payments, so it’s important to review the terms of your Agreement before you agree to take the loan. These loans also require collateral more often than other types of loans. If you know that you can pay back the loan quickly, this could be your best option because you’ll save money.
It’s usually easier for businesses to acquire these loans as well. They have lower requirements than long-term loans since they’re smaller. Small businesses benefit the most from these loans, as they can keep a business in operation long enough to gain clients.
In Addition to Financing, Your FundingTree Offers Business Services Which Help Business Owners Manage and Protect Their Business and Employees!
Types of Short Term Loans
Invoice Financing – This type of loan allows you to borrow money against invoices from your customers. You’ll need to provide the lender with your accounts receivable so they can see how much you’re owed, the length of time the invoices have aged, and other factors.
When you use this option, you’re able to give your business an infusion of cash without waiting for customers to settle their debts. You’re paying a little bit more now to get your money faster.
Lines of Credit – A line of credit works in the same way a credit card does. Lenders determine the maximum amount of credit they’ll give you and put it into an account you can draw on. Generally, lines of credit have a lower APR. This form of credit is good for businesses that want to have more control over their finances.
Online Installment Loans – Before the internet, businesses would have to go to a physical bank, fill out an application, and wait. It could take weeks to get a check!
Now, you only have to fill out a quick online application, receive an answer within minutes, and the money could be in your business account within hours after being approved.
This option gives businesses financial flexibility so that they can get what they need now instead of having to plan weeks in advance. Installment loans are a very common type of funding for businesses.
Medium Term Loans
These loans typically have a two to five-year repayment term. Sometimes your company needs money to expand services and grow. If you need money that will help you get more customers or expand your market reach, this could be the best loan option for you.
You can still manage the amount of interest that you pay back, but you’ll have lower payments than a short-term loan. Many businesses use this type of loan to buy equipment that will allow them to serve more customers. If you already have customers interested in a particular service, you can use this loan to expand.
You should always talk to a financial advisor before taking out a medium-term loan for growth. Make sure that you don’t borrow more than you can afford to pay back, as this will actually hurt your growth.
The biggest benefit of these loans, apart from helping a business transition from small to large, is the improved credit ranking. Bigger businesses need to borrow more money when they choose to expand, meaning they need larger credit scores. Medium-term loans allow companies to improve their credit relatively risk-free.
Types of Medium Term Loans
Collateral or Asset Based Loan – These loans are easier to acquire because the lender holds the rights to collateral in the case of non-payment. The collateral could range from real estate to accounts receivable.
Equipment loans – If you need a specific piece of equipment, these loans will give you the money for it. The downside of this type of loan is that you can only use it for a specific purpose, but it’s great for small business owners.
Unsecured Loan – These are the traditional loans that most people think of when they look for financing. They aren’t tied to any kind of collateral, and you can use them for anything you choose. Since they aren’t secured, it can be more difficult to get these loans.
Long Term Loans
These loans are perfect for established businesses looking to make a major purchase and limit the size of their repayments. You’ll make lower payments, but you’ll pay back more money over the life of the loan because there are more interest payments. These loans tend to have a life of between 10 and 25 years.
If your business has plans to expand and you need a new building, these loans will allow you to own the new building while making payments on it. You can get anywhere from a few thousand dollars to millions of dollars using these loans.
They also allow you to buy more equipment, establish your company in new markets, or develop a national marketing campaign.
Long-term loans allow you to get the money you need without relying on investors and giving up a percentage of your business in return. You won’t have to worry about outside interference from anyone. These loans also tend to have lower interest rates than short-term loans because of the amount of money involved.
We Help You Find the Best Financing for Your Business
No matter what stage of life your business is in, you’ll need fast infusions of cash at some point. Here at Your FundingTree, we can help you find a loan from some of the best business lenders. We’ve made it easy to find the funding source that you need.
Before taking out a loan, there are a few things you should consider. First, think about what you need the loan for. Sometimes it’s easier to get a loan for specific purposes, such as an equipment loan. Knowing what you’ll use your loan proceeds for will help you determine which type of loan to take out. If you think you’ll need money on an ongoing basis, applying for a line of credit is the way to go.
Next, make sure that you don’t over-exert your finances. You should only apply for an amount of money that you know you can repay. Carefully plan out your finances and speak to an advisor before you take out a loan.
Consider when you need your money. With most online lenders, your funds will show up in your account within a few days, but others will want you to send them information before completing the loan. How fast you need your money will help you narrow down your options.
You should always keep track of your credit score. Knowing your credit score will help you find the right loan for your needs and save you the trouble of applying for loans outside of your means. One of the benefits of our services is that using us to look at your funding options won’t affect your credit score. You can see your options without having a mark against your credit.
What are some of the benefits of working with Your FundingTree?
Lenders Compete for Your Business
As a business owner, you know how important competition is. Competition causes companies to provide the best service possible and lowers costs. When banks and lenders compete to give you a loan, they’ll have to give you the best offer possible to earn your business.
We take your application and determine which lenders best match your needs. Those lenders then use your information to determine their best offer. Since they know that they’re in competition with other lenders, they’ll often offer you terms that you wouldn’t be able to find by going directly to them.
You then go over the offers, decide which one works best for you, and accept it based on your preferences. It’s that easy!
One of the worst parts of finding a loan is having to apply to several different lenders. This takes time away from what you really want to do, which is to run your business. When you use our service, you can get offers from multiple lenders without having to do the legwork. We’ll do the work of finding the lenders and giving them your information; you only have to decide which loan best works for you.
We’ve also gone through the trouble of vetting the lenders, meaning you’ll only receive offers from banks and other professional lenders. We only use lenders that we trust!
Every industry has specific and unique needs from lenders. We have a nationwide network of lenders that serve every type of industry, from transportation to advertising agencies. All the lenders we work with have decades of experience in the financial services industry, and we know which lender works best for your needs.
Our Services Are Free
You don’t have to spend your money to find the right financing option for your business. Fill out a quick two-minute application and you’ll receive offers from trusted lenders. We’ll never charge you for our services. You don’t even have to sign up for an account with us to receive offers!
Discover Your Term Loan Options Today
Now that you know more about term loans, it’s time to explore your options. If you need money to grow or sustain your business, you’re in the right place. Fill out a quick two-minute form and our industry experts will match you with the best loan options from our nationwide network of lenders.
If you have any questions, get in touch with us today. If you’re ready to discover your lending options and find the perfect term loan or other types of installment loans for your business, go ahead and fill out our quick online application today!