Traditionally a Business Term Loan is a lump sum of funds, plus interest and a Business Term Loan allows borrowers to access a set amount of funds that is repaid over a set period of time.
Some Alternative Lenders may require monthly, weekly, or daily payments and the total amount of the loan with interest has to be repaid in full.
The business owner/owners still maintain full ownership of their business after they have secured a Business Term Loan.
Business Term Loans are standard debt financing having standard payments with a maturity and amortization schedule.
Business Term Loans vary in size, with its structure and uses all depending upon the Lender.
A Business Term Loan from any banking institution might have many different underwriting requirements than that of a Mid Prime Lender that would specialize in the buying-out of high-interest MCA-Merchant Cash Advances.
Business Term Loans are typically collateralized using the assets (Real Estate, Raw Land, Equipment, Accounts Receivable or Cash Flow) of the borrowing business.
Every Lender will have their own individual requirements.
At times they may require that a blanket lien be placed on all of a business’ assets when a Business Term Loan is provided.
A Short-Term Loan has expedited repayment periods that are between six and eighteen months. These type of business loans are the best for situations where a business sees a near-immediate Return On Investment from its financing, like purchasing the upfront costs needed for a project or from picking up bulk inventory for a holiday season.
With Intermediate-Term Loans the intermediate repayment falls between one to three years. This type of business loan is therefore essentially a middle ground for entrepreneurs that do not need short or long-term financing.
With Long-Term Loans an entrepreneur selects the longer repayment periods in order to lower their monthly payments and spread out the borrowed amount for as long as they possibly can.
Though they will pay more in interest payments, they opt for longer repayment periods as a way to preserve their cash flow.
Funding limits do vary from one lender to another lender, yet a business can secure financing from $10,000 to $10,000,000 through Business Term Financing.
The bank lender’s lending rates are determined by the prime rate + 2% while non-banks providing Business Term Financing, have an average interest rate of around 1% per month that will increase going forward.
A business may opt for shorter terms or even longer terms, depending on their individual financial needs and also the capability of the business.
The financing process takes between thirty to ninety days with banks or credit unions, yet fortunately non-bank lenders can move a business from the lending application to funding/financing within twenty-four hours.
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