Business Loans : What is term loans ?

Posted Date : 09 Sep 2019

Posted By : Capitalneed

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Business Loans : What is term loans?

If you are looking to expand your existing business and starting to look at funding options, this article is for you. There are a few main types of business loans, The most common one is term loan as mentioned below :

Term loans are the most common and well-known type of business loans. Term loan enable borrowers to finance everything from offices / houses to any machinery or equipments. 

Following are the common steps to apply for this loan :
A borrower applies for a loan.
Once approved, the loan funds are issued in a lump sum to be used for purposes the borrower has outlined in the application.
The borrower then repays the loan over a set period of time, also paying an additional charge to the lender known as interest.
Once the term has been completed, the loan is considered paid (in most cases), and the borrower is released from the liabilities of the loan agreement.

Still, Term loan has some limitations like :

For term loan, There is Strict lending policies. Loan funds can usually only be used for a specific purpose, as defined in the original lending agreement. Banks and numerours loan agencies works on their specific eligibility parameters which may vary from bank to bak or from company to company. Once you apply for the loan term, Applying for a traditional term loan can take a long time, especially for more complicated deals, or for businesses that are new or have less than perfect credit histories. Also, because there may be large sums of money involved, terms can stretch out for long periods of time, tying business owners to a financial product for years.
ways to continue growing your business.

An intermediate-term loan generally runs more than one - but less than three - years and is paid in monthly installments from a company's cash flow. A long-term loan runs for three to 25 years, uses company assets as collateral, and requires monthly or quarterly payments from profits or cash flow.