Are you looking for ways to make your business bigger and better? Do you need help decoding the many words and phrases of the finance industry? Your small business doesn’t need to suffer. Check out this quick guide to term loans and why they may be the answer to your business needs.
The simple definition of a term loan is that it allows you (the borrower) to receive a lump sum of money from the bank (the lender). You then repay the loan at fixed intervals. This typically means a monthly payment, but some business owners repay them weekly or bi-weekly, too. The set period of time is the term, hence the name of the loan.
Reasons to Use Term Loans
There are several benefits to applying for using a term loan. For one thing, they have lower interest rates since they tend to take longer for you to repay. A loan is also beneficial because it allows you to keep your current cash flow for other needs, such as paying employees. The application process is often much quicker than more traditional loans, not to mention the fact that it is tax-deductible and easier to budget for since you always know exactly how much each payment will be. Finally, you have full control over the funding, which means you can use it exactly how you’d like without needing to approve it with the financer.
Ideas for Using Your Financing
Of course, all the funding with none of the pressure from financers may leave you feeling unsure about where to start. Luckily, there are plenty of ideas:
- Invest in a Bigger Business – This could mean purchasing new equipment, adding to your inventory, or even opening a new location for a company that is growing in popularity.
- Hire More People – Maybe you’ve been working with a skeleton crew for too long and would like to take some time to yourself. A loan helps you finance hiring more people.
- Pay Off Old Debt – Maybe the last few months with the business weren’t quite as strong as you’d hoped. Catch up on old bills if you need to.
Of course, there is one major thing you should do with at least some of your financing, and that saves it for a later date. After all, you should always be prepared in case of an emergency.
If you decide a term loan is a right choice for your business, ensure you work with a reputable lender. Look for a financer that is licensed, insured, and has excellent reviews.