It’s normal for business owners to need additional money to help their companies grow and expand. While you can always borrow from friends or partner with investors, most business owners prefer to use traditional small business loans to finance the expansion. There are dozens of different loan types out there, but term loans often stand out as the best option for most businesses. Here’s what you need to know about this type of loan and why you should consider using one.
Term Loans Explained
When you apply for a term loan, you’re applying for a specific sum of money with a lender or bank. If approved, the lender will give you a lump sum payment. You then have to repay that loan plus any interest accrued by the end of the loan’s term according to the lender’s preferred repayment schedule. Most often, you’ll send payments monthly, but some lenders ask you to make payments weekly.
Before you agree to any loan, make sure you’re comfortable with the terms and conditions. If you’re concerned about your business’s ability to repay the loan or aren’t happy with the interest rate lenders offer you, keep looking.
The Benefits of These Loans
Term loans are some of the most popular loan types for small business owners. They typically offer low interest rates and their long repayment terms make it easier to plan your budget each month. In many instances, the interest you pay on these loans can be deducted from your annual tax liability, potentially saving you hundreds of dollars come tax season.
Most importantly, the loans allow you to retain control over your business. You won’t have to share your profits with an investor or take on an unwanted business partner that might compromise your company’s integrity.
When To Use Term Loans
Some lenders place restrictions on how you can use the money they lend you. However, most term financing can be used however you see fit. You can use the money to help you get new equipment, finance the purchase of a new building or even invest in new inventory to improve your product offerings. Ultimately, it’s up to you to figure out when and how to use your loan. Just make sure you communicate your intended use with your lender. This way, they’ll be able to help you find the best type of loan for your needs.
A term loan is a great option for businesses of all sizes. If you’re in need of money to help you grow your business, consider applying for this type of loan.