As per Investopedia, “A term loan is a loan from a bank for a specific amount that has a specified repayment schedule and a fixed or floating interest rate.” Most term loan providers will extend loans with repayment terms from one year to ten years. Highest qualifying clients, through their own research, can also find hidden gem providers who can extend loans up to thirty years. Term loans tend to involve unfixed interest rates in which additional balance is added in order to satisfy repayment.
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Short Term Loan
For many small business owners, a short term loan makes the most sense. Short term loans are relatively easy to secure, and you can receive your funds sometimes even within 24 hours. In today’s day and age, the plethora of alternative lending can be overwhelming to some business owners. Due to the abundance of alternative lending options available, it is ever so easy to get funds for your business without having to deal with the restrictive nature and requirements of traditional banking institutions. Small business owners are now easily securing the funds for their business without even having to step into a bank. There are many instances in which small to medium sized small businesses do not need long term loans or financing.
On the alternative lending market, financing options like working capital loans, merchant cash advances, or equipment financing and leasing offer everything a small business owner may need. These options provide flexibility while offering very quick turnaround times so that business owners do not skip a beat in day to day business. This form of unsecured financing is expected to be repaid within a shorter length of time, generally six to eighteen months. A short-term loan has a quick approval process, do not require collateral, and require minimal financial documentation. Consideration of short term financing can range from needing fast cash for a repair to any other business venture in which small business owners cannot wait thirty days for their funds. Not only are small business loans good for emergencies but they are quick fixes to unsteady cash flow. Overall, short term loans are one of the easiest options for small businesses to obtain liquidity and break through any financial challenges faced. Long term loans, can be thought of as longer termed debt taken on.
Businesses Benefiting Greatest from Short Term Loans
Small Business Owners Who Cannot Wait
As mentioned in a previous post, there are many instances where surprises spring up in day to day business. Maybe one of your suppliers is offering a discount this month, or you see a special foreclosure on the market and it is your dream space. Whatever the case may be, you need to take advantage of the opportunities in order to increase sales or take business to the next level. All is lined up but the only thing missing is the actual cash in the account. In this exact instance, a short term loan is the most obvious choice. Within 24 hours of applying, funds can be transferred which allows you to never leave money on the table. You are in the business to make money, not lose money. It always must be kept into consideration that with the swift ease of obtaining the needed capital, the cost for the funds is generally higher compared to longer term options. One question business owners must ask themselves when weighing out the pros and cons of term loans is will the return on the investment be worth it? Short term loan options are generally higher in overall cost due to being uncollateralized, completely unrestricted, and requiring much less financial documentation (And did I mention funded in 24 hours?). If the opportunity to make a significant return on the loan is present then the decision is a no-brainer.
Small Business Owners Seeking to Balance Cash Flow
In a recent study conducted by AMP Advance, seventy five percent of our customers stated that the largest cause of their stress in day to day operations is cash flow. Many small business owners are going through the exact same things each year but in different industries. Steady cash flow is a constant struggle and it is what everyone is trying to conquer! Finding yourself desiring steady cash flow? That is easy, begin by doing research and find yourself a short term loan provider and secure a short term loan of up to $500,000 to even out the peaks and valleys in your revenue. Stop staying awake at night wondering how you’re going to make it through the week. Do not be like the seventy five percent, balance your cash flow with a short term loan today.
Business Owners Sensitive to Long Term Debt
Client’s who have this mindset come across my desk daily. I cannot knock it, it’s completely understandable. Nobody likes long term contracts and truth be told not many people know how it feels making a commitment for up to 30 years at one time. Short term financing provides a solution to those small business owners facing this dilemma. Payments observed on the loan generally tend to be a higher dollar amount due to having to fit the entire loan in a substantially shorter amount of time. Short term loan providers are flexible and some even offer early payoff discounts if you receive your return on your investment sooner than you had previously thought.
Business Owners Using Short Term Loans for Credit Repair
The quickness and ease of short term loan options can help provide businesses with a quick credit rehabilitation. Ask your loan provider if the installment payments are reported to the major credit agencies. If each installment payment reports to the credit agencies, then based on your payment structure decided you are in for a great boost in credit score. Keep this in mind when determining your payment schedule. Most providers provide daily payments which seem like a complete burden. In reality, the absolute opposite. Not only do terms associated with daily payments cost the least in the long run, but they provide you with opportunities daily to increase your credit score. Using financing for your business doesn’t sound all that bad now does it? Who would’ve thought that just by simply making the scheduled installment payments, a noticeable credit improvement would occur!
Long Term Loan
Long- term loans not only have long term repayment structures but they also have just as long application processes. A long term loan generally includes funded amounts up to over five million dollars and repayment terms up to thirty years. This type of financing, with long term installment payments, is vital to certain industries and several different types of businesses. Compared to short term loans, in which up- front interest is higher, long term loans generally have next to zero upfront cost. With zero or close to zero upfront cost, long term loans are generally more expensive due to the fact that you accrue interest on them over time. If your set installment loan is for 30 years then you have to expect 30 years of accrued interest to the overall cost. Along with the increased overall cost, long term loans are more difficult to secure and the application process generally takes 30 business days. Long term loans are required to adhere to strict standards and qualification practices as well as a meticulous due diligence process. An alternative lender, like AMP Advance, provides bad credit loans as well as long term loans to assist small business owners who do not have adequate credit histories and whom traditional institutionalized sources would not provide the funds to.
Which Term Loan Option is The Best?
At the end of the day, whatever term loan option decided is best determined on your short and longer term needs. Weigh out all your options, and create short and long term goals. Do you need short term financing or can it wait? Do you want to make the commitment for twenty or more years? For some, long term financing options are vital to the long term integrity of the business and security of your tangible assets. To most, short term loan options are their best option. Work with your lender, they can truly customize any type of loan, long or short, to your exact company’s needs setting you up for prosperous growth and success.
AMP Advance is a Miami based industry leading direct funding source out of Coconut Grove, Florida. We help those who are in need of small business financing by providing web based financing options & funding solutions. Our solutions assist small business owners find matching opportunities while assisting small business owners improve their overall financial situations. AMP Advance provides small business loans, business lines of credit, accounts receivable financing, equipment financing, unsecured business loans, and revenue based loans to millions of small business owners nationwide.