The 3 Different Types Of Term Loans For Your Business
Whether the head of a company is a small business owner, midsize business owner, or big business owner, it’s very likely they all have one thing in common – at one time or another they have probably needed a loan. Many entrepreneurs acquire a startup loan to begin the process of creating a business. During the operation of a business, it isn’t at all uncommon to run into a bit of a “funding issue” here and there – so loans come in handy for already-established businesses, as well.
There are countless types of loans that business owners may turn to, including the following:
- Merchant cash advances
- Commercial real estate loans
- Invoice financing or invoice factoring
- Equipment loans
- Business line of credit
- SBA loans and more
One kind of loan business owners may turn to is that of a term loan. There are, however, different types of term loans. Here we will examine a term loan in general and then look at the various types.
Term Loans – What Are They?
In exchange for pre-specified borrowing terms, a set amount of cash is provided to a borrower courtesy of a term loan. Very often, if a business has a sound financial statement and is already established, term loans are far more likely to be granted. The business owner/borrower agrees to specific terms (i.e., fixed interest rate, a flowing interest rate, repayment schedule, etc.) in exchange for a predetermined amount of cash. To reduce the total cost of the loan as well as the payment amounts, a considerable down payment is sometimes required.
Term Loan Types
There are three types of term loans. The payback time of the loan is more or less reflected in the name:
- Long-Term Loans – quarterly or monthly payments are required from either cash flow or profits, and collateral in the form of company assets is also required. These types of term loans can run from three years up to as many as 25 years. There will be a limit to financial commitments the business may take on including principles’ salaries, other debts, dividends, etc. To be earmarked for loan payment, the lender may specify the borrowing business is to set aside a predetermined amount of profit.
- Intermediate-Term Loans – paid back from the cash flow of the borrowing company, these loans are repaid in monthly installments and, more times than not, apply to a run of 1 to 3 years.
- Short-Term Loans – if the borrowing business can’t qualify for a line of credit, these kinds of loans may be offered. Short-term loans can apply to a loan up to and in excess of 18 months, but they are usually paid off in less than a year.
Contact VIP Capital Funding For a Small Business Loan
When you need a small business loan, before you go elsewhere, turn to us. We are VIP Capital Funding. We offer early prepayment discounts on flexible business loans. If you need funding for day-to-day operational expenses and more, apply for a small business loan with us.
For early prepayment discounts, no upfront fees, a tax deductible interest rate, and more, speak to one of our representatives at 800-735-7754 or email us at firstname.lastname@example.org.
You can also hit the “Apply Now” tab on our homepage and use our convenient online form to get started.