Once you’ve decided that it will be necessary to secure a business loan to keep your business operating or to take advantage of available opportunities, it will also be important to decide on the most appropriate business loan term option. You may not be able to get these favorable terms, but you should have an idea of what you need in mind so that you can at least come close to getting what you need. Given that there is such a wide range of business loan term options, it will be worth your while to give the matter some serious thought.
There are three different business loan term options commonly available when seeking a business loan, and each of them is described below:
- Short-term – short-term loans routinely last for a year or less, which means you probably are not borrowing a huge amount of money, and you intend to pay back the loan in a short period. Some examples of short-term loans might be microloans, bridge loans, or lines of credit.
- Medium-term – these types of loans typically last between one and five years, and are often used to cover equipment financing or possibly student loans.
- Long-term loans will generally last more than five years and involve larger sums of borrowed money. Such loans are typified by home mortgages, SBA 7(a) loans, and traditional business loans.
You’ll need to consider a couple more factors when deciding on a business loan term option. For instance, you’ll want to secure the lowest interest rate possible, since the majority of the cost associated with any business loan will always be the interest paid. Next, you’ll need to consider how to maintain cash flow while repaying the loan, so you’ll need to determine exactly how much money you need each month for business operations, and still be able to make loan repayments. Finally, it will be greatly to your advantage to keep your credit score in the most vital health, because the terms available to you are often contingent on how strong your credit history is.
If you need any help in choosing the best possible business loan term, we may be able to help you. Contact us at Scarlan Capital Group, so our specialists can review some options with you, and help you to secure the most favorable and manageable terms.