There are numerous financing options available for small business owners. There are loans that will you approve you within a day, others take several months. Some will have low interest rates, and others have high ones. One of the most popular financing options is a business term loan.
A term loan, or a business loan, provides funds for businesses to start or expand. They range from $5,000 to $2,000,000. It is made for a specific amount of money and repaid over a pre-determined period of time. The repayment terms fall between 1 and 5 years. The term length will depend on what your credit is and the requirements of the lender. Interest rates will start at around 6%.
Business term loans have either a fixed interest rate or a flat fee so your payment will not increase during the life of the loan. This makes it one of the most borrower-friendly methods of financing because you will know ahead of time how the loan will fit within your budget so you can pay it off.
Here are some of the following reasons a business term loan can be used for:
You need to be able to show why you need to borrow the money and the exact plan to use the funds for and how it will help our business increase its sales and profits. By doing this, the lender will feel confident that your business will be able to make the repayment.
The first step in preparing to apply for a business term loan is to figure out how much money you need to borrow. Be careful to not guess because you could end up overestimating and end up with more debt, or you could underestimate and get less money that you need. Consider calculating the loan by writing out cost projections and what you can afford in monthly payments and interest.
Shop around and look at what lenders are offering and note any hidden costs and fees. Some fees to look out for is processing fees and early repayment fees. Once you have decided on the ones that work for you and match what you are looking for, evaluate them and see which one is the best for your business.
You need to have a strong business profile to qualify for a business term loan. You need at least three years of business history, a credit score of 680 or higher, and an annual business revenue of $300,000 or higher. By having a strong business profile, you will have a higher loan amount, long repayment term, and a low interest rate.
You also will most likely be asked to provide collateral so the lender can make sure they can get the money if you default on the loan.
There are different requirements needed for the application depending on the lender but below are some of the common documents requested:
If you find that after you have all the paperwork required for applying and you apply but get turned down, take a look at your credit and see what it looks like. The better your credit, the more chance you have of getting approved. If your score is low, start to take step to improve it.
One of the ways you can improve your credit is by setting up automatic payments on your bills to avoid any late payments.
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