Small-business term loans are like SBA loans. The only difference is that small-business term loans are not guaranteed by the SBA. In other words, the lender will not be reimbursed by a federal agency if you default on your loan. The maximum amount you can borrow depends on your personal credit score and other details related to the business.
Small-business term loans are issued in one lump sum. You’re expected to make fixed payments against the total loan. These could be monthly, weekly, or bi-weekly, until the loan is paid. The name “term loan” means the loan comes with a fixed repayment plan for a specific length of time. It doesn’t matter how much of the loan capital you spend up front, because you still have to repay the total loan amount at a fixed rate.
There are several benefits to choosing a small-business term loan over a business line of credit. These benefits include:
There are three main types of small-business term loans: short, intermediate, and long. Each type has a different term length, ranging from less than a year to up to 20 years. The shorter terms typically have higher interest rates, while the longer terms have lower interest rates. Interest rates start at 4.99% yearly, but sometimes reach 30% yearly. Your personal credit score and business financials will influence the fixed terms and interest rates as well.
Short Term – Small-business short-term loans last for no longer than 12 months. They have the highest interest rates, and you have up to 12 months to pay off the loan. Short-term loans are good if you need short-term financing for small purchases or emergency purchases.
Intermediate-Term – Small-business intermediate-term loans can last anywhere from 1 year to 5 years. Their interest rates tend to be average, depending on factors related to the owner and the business. You can use an intermediate-term loan to pay for larger business expenses such as equipment, inventory, or consolidation of business debt.
Long-Term – Small-business long-term loans have terms anywhere from 6 years to 20 years. You may find the fixed interest rates to be lower if the term is long enough. The best use of a long-term loan would be to purchase larger investments for your company, such as heavy equipment and real estate, or to fund construction projects.
Globelend Capital offers deals on short-term and intermediate-term small-business loans through participating banks and lenders. We’ll work with our partners to find you the lowest rates possible for your loan request. Within 24 hours, you could have the full loan amount deposited into your commercial bank account.