Term loan is a medium-to-long-term loan option with terms that last anywhere from 1 to 10 years. Term loans offer large amount of capital to the business in a single installment. As a provider of term loans, for example, FundingJack offers small business term loans, for amounts up to 500,000UK.
Term loans offer many advantages – it can be a solution for financing large investments (hiring new staff, expanding to additional branch location, investing in equipment).
Based on their length, term loans are best for financing a business’ long-term growth, and are generally used for purchasing assets that will not be converted to cash within a year.
Term Loan Benefits
Affordable interest rates
Due to their longer durations, term loans are available at lower interest rates than shorter-term loans. Interest rates are depending on factors such as: the length of the loan, the collateral used to secure the loan and the borrower’s time in business. Additionally, the interest rates on term loans are fixedfor the lifetime of the loan so you can have an exact idea as to its cost.
Simple Application Process
Lenders such as FundingJack, usually offer a simple, streamlined online application process, and offer approval within 24 hours. When the loan is approved, funding occurs within 7 days. This can be convenient for for businesses that need cash quickly. This option is much faster than other forms of financing. Since a term loan is debt financing, it does not affect the equity shareholders, and keeps the company’s equity intact.
Term loans are flexible
The name of the game here is flexibility – loan’s duration, amount and interest rate are all be negotiated before the loan is granted. The better the business’ and business owners’ initial parameters are, the more flexible and advantageous these terms are likely to be.
Allows operational cash flow to be used elsewhere
Term loans give the borrowing business the ability to use their cash flow in other areas, while the loan provides the funding needed for larger investments in the business. For example, a term loan can give a company the capital it needs to hire a new employee, covering the time it takes to train the employee and allow them to establish themselves within the company before beginning to contribute to the bottom line.
Use it for Tax relief
You can deduct the interest of a term loan from your taxes, and the regular payment amounts allow for clear budgeting as the same amount is paid every month.