What is a Business Term Loan?
A Business Term Loan is a financing option funded by banks and non-bank lenders that provides Commercial Loans to businesses. In these loan programs, the company must pay the funds back, with interest, over a predetermined period of time.
Business Term Loans typically offer higher funding amounts, with longer repayment periods and at lower interest rates than many other Business Financing alternatives. These characteristics tend to make Business Term Loans a preferred choice for company owners in need of a large amount of capital.
Business Term Loans show up as a line item on the company’s balance sheet and debt schedule and not the company’s owners’ and operators’ personal credit profiles. Therefore this product allows the company to qualify for capital based on its own merits versus the owners of the company taking out a personal loan to self-fund the enterprise.
Whether through a large bank, a local community bank, or an independent non-bank lender that is a Term Loan provider, these loan products are on average your lowest cost of capital financing products on the marketplace.
Companies typically use the capital produced from a Business Term Loans for a list of items that may include categories such as equipment purchasing capital, expansion or renovation, upgrade office spacing, or make a one-time investment for any other project.
Business Term Loans are a debt financing product that uses a Line-Based underwriting model to determine the full loan offer. Line-Based Debt Financing means that the funding offer will rely on the company’s and its owner’s key factors like the amount of revenues the company produces, how much of a profit the business is reporting off of that revenue, the length of time in business for the company, the credit score of the business and the personal credit score of its owners.
Once all of these factors have been taken into account a bank or non-bank lender will issue a Business Term Loan offer which will typically be in the area of 15% to 25% of their prior full-year revenues.
The term length of repayment in one of these loans can vary from 24 months to 60 months, the averages are a 36 – 60-month term. The payments are almost always monthly and occasionally bi-monthly. Term loans generally come with interest rates on the lower side, APR’s that can dip as low as 7%.
If an organization is serious about wanting to grow and scale their company. Then a Business Term Loan can be a company’s best bet to provide the capital needed.
The Business Term Loan is open for any of the following purposes including but not limited to: Business Expansion, Franchise Financing, Purchases of Fixed Assets and Equipment, to Purchase / construction/renovation of condominium unit / residential property for lease, to Purchase / construction/renovation of commercial property and for refinancing of existing commercial loan/mortgage
With a business term loan, a business can borrow a lump sum of capital from a lender that is paid back in steady principal and interest increments over the set borrowing period term at a fixed APR.
Business Term Loans are set up to meet pretty much any business need, to give owners access to capital to invest in their companies.
Companies can leverage their awarded loan for everything from capital improvements to financing new equipment or hiring more staff.
Business Term Loans come in different shapes and sizes for companies. They can vary in the amount of time the company has to repay the capital from 24 months to max 60 months. The average is between 30 to up to 48 months in Term.
Due to the longer repayment terms, these Business Term Loans are typically available at lower interest rates compared to borrowing options like lines of credit or business credit cards.
Business Term Loans can also offer more flexibility in both the uses of capital and that lenders may offer a range of loan repayment terms to choose from. A term loan can satisfy one or several funding needs for a business. Also, companies have the flexibility to select the term that best fits their timeline and budget for repayment.
These products provide companies with predictable payment structures. With a Business Term Loan, a company’s repayment schedule is set in stone once they sign their offer term sheet. Assuming their Business Term Loan came with a fixed rate, therefore the weekly, bi-weekly or monthly payment loan payments will be the exact same every single time including principal and interests which takes the guesswork out of budgeting and allows the product to work into the companies balance sheet as a simple line item.
Business Term loans can only work for companies that meet the following guidelines that include but are not limited to:
Operating their company for a minimum of 3 years under the current Tax ID/EIN number
Since Business Term Loans come with extended repayment periods compared to short-term funding options, a companies financials and credit score are more important
Companies need to have been operating with a reported profit for the two most recent years. The financial statements, tax returns, and bank statements of the company will be requested to validate the company meets these criteria.
The company must be engaged in, or propose to do business in, the U.S.
The companies owners may need to have reasonable equity already or be ready to invest to build one up prior to funding.
Moreover, the principals and the business have a good credit score with no tax liens or judgment issues.
The owner/principals and the company itself must both have good credit scores.
A Business Term Loan is a financing option funded by banks and non-bank lenders that provides Commercial Loans to businesses.
In closing, According to official data from the World Bank and projections from Trading Economics, The Gross Domestic Product (GDP) in the United States rose to a level of $21.43 trillion, compared with an increase of 5.4 percent, or $1,060.8 billion, in 2018.
The GDP value of the United States represents 17.50 percent of the world economy. The 30 million U.S Businesses make up a major portion of that GDP number. Those Businesses need access to capital to operate and dominate the economy.
Business Term Loans make up one the best options for companies to acquire the capital they need to grow and expand. Troy Business Grouphas a team of seasoned Business Financing Consultants that specialize in providing clients with access to the best Business Term Loan options.
Please apply online, email us for an appointment, or call us today. Our team is committed to helping your business grow with Business Term Loans and will guide you through the loan process each step of the way.