Business Term Loans

Business Term Loans

Funding up to $5 million

Fixed payments for long term & short term loans
You can find out more about lenders and their variable-rate and fixed-rate loans.

Ready to grow your business?

See how much you qualify for:
Current monthly sales deposit average to your business bank account?
How much Working Capital would you like for your business?

Intro to Business Term Loans

When people refer to small businesses loans they usually mean business term loans. This is the traditional and most well-known small business loan. The loan is repaid with fixed monthly payments and interest over a set term. Many companies prefer this financing option despite the inconveniences. It is because a business loan can be the most beneficial to your cash flow when you are looking to invest in growth or make significant investments.

What is a Business Term Loan?

When small business owners hear “small business loan”, they immediately think of a business term loan. The repayment terms are simple, and the fee structure is straightforward. The borrower agrees to repay the money in regular installments over a specified period. This period is called a loan-term. For a fixed repayment period, you usually pay monthly.

The interest is the fee that lenders charge to borrow money . Your payments are determined by the percentage rate. The percentage rate also determines how much you will repay in total over the term of the loan.

Fixed interest rates are available for business term loans. Fixed interest rates mean that lenders will not change the rate throughout the term. Variable interest rates are usually linked to the Wall Street Journal prime rate. Fixed interest rate loans are preferred by many small business owners.

Term loans for small businesses are generally cheaper and offer higher borrowing limits than other financing options. They are the most difficult to qualify for. Small Business Administration loans are examples of long-term loan that are difficult to qualify for.

How do Business Term Loans Work?

All business term loan payments include monthly interest, a fixed term, and monthly payments. There are several different interest systems. Each type has pros and cons. Your interest rate could change or remain the same throughout your term, depending on which type you choose. While your monthly payment may remain the same, your interest portion (instead of your borrowed amount) can also change.

The type of interest you pay will also affect whether or not it is a good idea to pay off the loan before its due date. Prepayment penalties are imposed on some loans, but others offer lower interest rates if you pay earlier.

Business term loans are often a good option for companies that want to invest in expensive and large capital assets. These are the assets that will allow your business to grow. These could be equipment or inventory. Term loans such as SBA loan and equipment finance would be ideal for this situation.

Other businesses use term loans as a way to finance their working capital. They may also use a term loan to consolidate high-interest debt in order to reduce their rate and payment by spreading out the debt over a longer period. A business may also use a term loan to pay taxes or cover payroll.

An Example of a Business Term Loan

Say you’re interested in purchasing a large one-time order of $100,000. You could expand your product offering in your store to meet the current demand of your customers and attract new ones. You don’t even have $100,000 in the bank.

You apply for a loan to start a small company. You agree to a five-year loan with a fixed rate of interest of 8% and monthly payments. You receive the money, and purchase your inventory immediately. The cost of buying inventory is spread out over 60 months. This type of term loan will be easier on your cash flow than, for example, a merchant cash advance that has a factor rate payable within six months or one year.

Business Term Loans – Facts, Research & Reports

According to the Consumer Financial Protection Bureau 70 percent of small business owners seek loans less than $250,000.

The 2019 Small Business Credit Survey reveals that 43% American small businesses seek external funding to grow their business. They went to an outside lender to borrow money to use for their business. Small business owners who applied for loans received 53% less than what they asked for.

According to the latest Joint Federal Reserve Small Business Credit Survey data, 21 percent of small businesses surveyed that had operated for less than two years and applied for funding did not receive any funding. Only 42 percent of applicants received the entire amount requested.

What Are the Advantages of Business Term Loans?

Term loans for business have more benefits than other types of financing. The term loans are the most affordable due to their fixed low interest rates, and longer terms. These loans also offer the largest borrowing amounts.

The simplicity of the fees and repayment schedule is another significant benefit. The majority of entrepreneurs are familiar with the business term loan process. They don’t need to spend time researching unfamiliar products to determine which would have the least impact on their capital. It may seem a waste of your time, since you know which product has the lowest rates and payments. Term loans are also easy to budget because of the repayment structure.

The best business loan products have strict requirements. But at least they are transparent. You will most likely be eligible for a business term loan if you have good credit and you’ve been in business at least a year. Lenders have no gray area when it comes to the requirements. You either meet these criteria, or you don’t. Either you have a good credit rating or not.

It’s not always clear how your business must perform to qualify for other products. Online lenders may offer long-term loans even if your credit score is not excellent. If your credit score falls short of perfect, some online lenders may allow you to use real-estate as collateral.

What are the Disadvantages to Business Term Loans

It is common for entrepreneurs to suffer from bad credit for reasons that are often beyond their control. The credit score is the single most important factor for term loans. You may not be approved if you have a bad credit rating. Most other online lending products are more accessible to borrowers with bad credit.

Some people have said that those who “need” money are not the best candidates for loans. This is almost correct. The people who have the most money in their bank account and can afford to pay off their investment themselves are usually those with the lowest interest rates and longest repayment terms.

Business term loans, unlike other loan products, are only designed for significant long-term revenue-generating investment. This option is not intended for short-term needs such as covering expenses in a tough patch or buying an extra order of inventory. You can use funds from other loan options, such as a line of credit. It’s not easy to get a bank loan without a repayment plan.

The interest rates mentioned above can be confusing. The interest rates of two business lender who offer the same product may differ. The fee structure for other products is the same, no matter where they are purchased.

Who Qualifies for Business Term Loans

Businesses that are approved generally meet the following criteria.

How to Apply for Business Term Loans

The application process is quick if you have all the information needed. After approval, the funds will appear in your account within 1-3 working days. How to start:

Your Business Term Loan Gets Set Up – Now What?

It’s not just about financing your business. This is a great opportunity to start building or improving your credit.
Make all payments due on time, no matter what type of loan you receive. Keep your credit balance below the limit if you have a business credit line.
Your credit score will be positively affected if you consistently pay your business term loans on time. This will give you access to better rates and terms the next time you need small business funding.

What if I am declined for a business term loan?

Lenders may decline loans for many reasons. Your personal credit score, or your annual income may not have been up to standard. Your cash flow may not have been strong enough to support the fixed monthly payment required for a loan with a longer term. This does not mean that you will not qualify for other small business financing options.

These other products might not offer the borrowing power, rates of interest, or terms that you were hoping for. If you can pay back the debt, then your second loan is likely to have lower interest rates and better terms. It is not impossible to get the loan of your dreams, it may just take longer than you expected.

Blue Tree Financing can guide you to the best option for you. We may recommend another business loan program, or other products. Business loans , credit cards and even personal loans are examples. These options are often easier to qualify than traditional bank loans.

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Current monthly sales deposit average to your business bank account?
How much Working Capital would you like for your business?