What Is a Term Loan?

A term loan is a type of business loan. In exchange for signing off on certain predetermined borrowing terms, the lender gives a borrower a lump sum of money. The terms of this upfront payment usually include a repayment schedule and fixed or floating interest rate.

This makes sense for small businesses looking to pay startup costs with lower stress. Unlike a personal loan or other business loan type, you don’t need to worry about accumulating loan payments over time. You’ll immediately have the funds to cover overhead costs and get off the ground.

Term loans are also useful for growing businesses that need to purchase fixed assets. For example, a manufacturing facility that needs to buy heavy equipment can use a term loan to make the one-time purchase.

The manufacturer will then be able to optimize production immediately, get more clients, and increase income. They’ll use this income to pay the loan back over time.

Term Loan Benefits

As you might expect, a core benefit of term loans is their set, pre-determined payment structure.

Business owners and decision-makers have a lot to consider when making everyday choices. This is especially true when it comes to assets and allocating funds. Constantly-rising interest rates and unpredictable payments can be extremely stressful since you won’t know how to budget precisely.

Term loans offer peace of mind because of their fixed payment schedule. You’ll know exactly how much of your loan you need to pay back and the specific dates those payments are due. You’ll also know the ins and outs of interest up front so you don’t need to worry about hidden fees or increasing rates.

Flexible and Scalable Cash Flow

Lump-sum term loans give you funding for big purchases. This means that you won’t need to scrape together and allocate money for expensive investments.

Business owners and CEOs can then designate their income and remaining funds to short-term operational costs. When you have the necessary funds to manage daily operations, you don’t need to worry about unexpectedly falling short.

You also will have the cash flow flexibility needed for emergencies like budget cuts, lower-than-expected income during a business period, or a security breach.

Lower Interest Rates

Business loan interest rates are calculated by your specific lender. However, you can expect interest rates for various loan types to fall into certain ranges.

A standard SBA loan will have an APR of about 11.5% at the lowest. The low end of a business line of credit is 10%. However, online term loans are available with as low as a 6% APR.

This is because term loans have large lump sums and therefore longer payback periods. Longer-duration loans are generally available at lower interest rates.

The interest of a term loan is also tax deductible, so you can make the most of your funds over time.

Various Options

There are a wide range of term loans. Duration, cash sums, and interest rates are all flexible. You’ll negotiate with the lender before they approve the loan so that you know exactly what you’re signing up for.

If a business or its owner has a high credit score, the terms are usually more favorable. You’ll have more leeway to negotiate and get higher loans with lower interest.

Getting a Term Loan: A How-To Guide

Another amazing advantage of term loans is that they’re easy to apply for. It’s an online process that you can do in minutes from the comfort of your own home. Niche Capital’s website will ask you a few questions about your situation and needs with a secure online form.

Applying is completely free, and you don’t need any collateral to secure the loan.

Our LENDERMATCH technology will then use your form to pair you with a lender that’s perfectly suited to your needs. You’ll be able to communicate with them and negotiate the terms of your loan. Since we have specialized lenders, you’ll work with someone who knows just what you need.

Once you’ve come to an agreement, you can confirm all of your details and sign loan forms online. There’s no need to go through a bank or credit union.

Then, you can collect your loan as early as the next business day.

Obtaining Your Loan

Term loans have extremely fast approval times, and it’s easy to collect the lump sum payment directly from your bank account. You could have funding within 24-48 hours. This means that you can start financing your needs sooner.

You can then use the term loan to buy new equipment, machinery, or software. You can also use it to purchase more real estate, refinance debt, cover inventory costs, or hire more employees. The ball is 100% in your court.

Even better, term loans are a type of debt financing. This means that it doesn’t impact the equity shareholder’s interest. Your equity will remain intact after you collect your loan, so you won’t need to worry about other problems unfolding for those who own shares of your business.

Take Advantage of Business Term Loans

So, what is a term loan? Basically, it’s a one-time loan that provides businesses with a lump sum to cover large purchases. Now that you know how to get one of these fixed variable loans, it’s time to get the funding your business needs to thrive.

Niche Capital is committed to getting businesses in a wide range of industries the loans they need for overhead costs. Our easy application process only requires you to answer a few questions, and we’ll pair you with an appropriate lender. Apply for a term loan today to access funds ASAP.