All You Need to Know About Term Loan
Statistics show that only one-third of new businesses can pull through the first ten years. One of the main reasons for failure is the lack of capital to sustain and grow the business. Therefore, as an entrepreneur, it is crucial that you be fully aware of all funding options available to you. To learn more about Loans, view here. Term loans, for instance, could be what you need to keep your firm afloat and even grow it to the next level. Read on to get more information on these loans.
A term loan is the amount of money that a borrower receives from a lender for a specific amount and which the borrower has to pay back in a specified repayment schedule. Interest charged on the loan could either be floating or fixed. With term loans, every amount you repay covers the interest and part of the principal amount. This loan also comes with a certain fee that you can choose to pay upfront or add to the total loan balance. Ensure that you consult with your lender to figure out how best to pay that fee.
In general terms, there are two types of term loans, i.e., secured and unsecured. Secured term loans refer to those which the lender needs collateral before granting you the loan. Read more about Loans. This simply means you need to put down an asset such that if it turns out you cannot repay the loan, they can sell off the asset to settle the debt. Unsecured term loans are, therefore, those which you do not need any form of collateral to qualify. Apart from this broad classification, we can further classify them according to the term.
Short term loans are for a brief period, typically between 1 to 2 years. This is ideal if you need liquidity for daily operations. If you are thinking of growing your business and you need a boost to do it, then short term loans are for you. The downside to these loans is they carry higher interest than long term loans.
Medium-term loans are those that take between 2 to 5 years. These loans are also ideal for entrepreneurs looking to expand an already existing business. Under normal circumstances, lenders give medium-term loans to businesses that have been operating for at least a year.
Long term loans are those that you can repay anywhere between 3 and 25 years. Their affordability is their greatest suit. If you have a strong business with a stable financial track record, then applying for a long term loan is beneficial to you. These loans are best for investing in a long term strategy aimed at expanding the business. Learn more from https://www.reference.com/article/points-loan-72b50c03124548a4?aq=loans&qo=cdpArticles.