At Colopy Corp, we often work with small and medium-sized businesses and consult them on how to make sound financial choices to sustain and grow their organization. Term loans frequently come up, as more and more business owners want to know what a term loan is and whether it’s the best decision for their current situation.
A term loan is essentially a loan from a bank or commercial lender that comes with a fixed or floating interest rate and a specific repayment schedule. The loan comes with a monthly repayment schedule, depending on the type, and has a set maturity date. Typically, banks would offer either intermediate term loans (running for less than 3 years and generally repaid in monthly installments) or long-term term loans (which can run for up to 25 years and are collateralized by a business’ assets).
Term loans are especially suitable for small businesses as they offer them the cash they need to operate. We at Colopy Corp recommend using your term loan for construction, debt consolidation, major capital improvements or any large capital investments such as machinery, as well as working capital. When banks make a decision whether to authorize a term loan, there are several factors they take into account – your character (whether you have managed any other loans), your credit capacity, collateral (which should be greater than the amount you’re borrowing), capital and others.
If you need more information on term loans or general advice on managing your business’ finances, get in touch with Colopy Corp today!