LONG TERM
A typical method of long-term business financing is the term loan. You receive an upfront lump sum of money to invest in your company and repay with interest over a defined time frame. This works well for growing companies with solid credit and substantial income. This loan type provides quick money, often taking 2–7 days.
Pros:
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Get a lump sum amount of cash to invest in the business.
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Borrow higher amounts
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Get funding in 2-7 days
Cons:
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May require some type of collateral
Best for:
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Businesses looking to grow
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Business owners with better credit and consistent business who can’t wait for funding
KEY TAKEAWAYS
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A term loan provides borrowers with a lump sum of cash upfront in exchange for specific borrowing terms.
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Borrowers agree to pay the lenders a fixed amount over a certain repayment schedule with either a fixed or floating interest rate.
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Term loans are commonly used by small businesses to purchase fixed assets, such as equipment or a new building.
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Borrowers prefer term loans because they offer more flexibility and lower interest rates.
Term loans are commonly granted to small businesses that need cash to purchase equipment, a new building for their production processes, or any other fixed assets to keep their businesses going. Some businesses borrow the cash they need to operate on a month-to-month basis.
Business owners must provide statements and other financial evidence demonstrating their creditworthiness. Approved borrowers get a lump sum of cash and are required to make payments over a certain period, usually on a monthly or quarterly repayment schedule.
