3 Things To Know About Term Loans As A Small Business Owner
As a small business owner, sometimes you need money to grow your business, which is where a term loan comes into play. A term loan is a form of financing you can use for your business.
#1: Lump Sum Loan
A term loan is what most people refer to as a small business loan. With a term loan, you are borrowing a lump sum from a lender. Then, you are expected to pay that lump sum off through a series of regular payments, usually paid each month, over the loan's length. The length of the loan and exact payment vary based on the lender and the amount loaned.
#2: Used for a Variety of Applications
One of the great things about a small business term loan is that it can be used for just about any business need you can think of. You can use a term loan to purchase new equipment. You can use the term loan to pay new staff for six months to expand your business. You can use the term loan to make capital improvements. The money needs to be going towards your business, and you need to have a plan for what you want to do with that money you share with your lender. Ideally, you will use the funds in a way that will help your business increase its profits.
#3: Qualification Criteria
When it comes to getting a small business term loan, you will have to apply for the loan. When you apply for the loan, you will need to make sure you have a solid credit score. Usually, as a small business owner, the lender will look at your personal credit score, so make sure you have your personal financial house in order. Next, they are going to want to know how long you have been in business. You will need records that show how long you have been in business. You will also need bank statements or profit and loss statements that show the revenue you are bringing in. A lender will want to make sure you have a business that is bringing in money and will be able to pay off the loan.
Most importantly, with a business term loan, you may be asked to put up some collateral form. That could be a title to the property you own or your business equipment. The lender is going to want to have something to seize if you fail to pay your loan.
Term loans for small businesses are lump sum loans. They will give you the money you need to grow your business in whatever way you see fit. You will need to have a good credit score, bring in reliable revenue, and have collateral to offer to increase your chance of getting a loan through a lender.