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Term Loan

Term loans are one of the most common financing options available to small business owners. They offer a lump sum of cash upfront and usually come with fixed payments that allow borrowers to better manage their cash flow. With a term loan, lenders provide borrowers with a lump sum of cash in exchange for pre-agreed upon repayment terms and either a fixed or floating interest rate. It’s a type of loan that is generally used to help businesses purchase essential fixed assets like equipment or a new building.

For business owners, the primary benefit of a term loan is that it allows them to secure a large amount of capital in one lump sum with fixed payments. This allows them to better plan for the future since they know exactly when and how much they need to pay each month. It also has the benefit of offering more flexibility when it comes to paying back the loan.

Short-term and intermediate-term term loans will often require balloon payments, while long-term loans come with fixed payments. When you’re taking out a term loan, it’s important to understand how balloon payments work as they can make it more difficult to pay back the loan.

Overall, term loans are a great financing option for small business owners as they offer fixed payments, long terms, and lower interest rates. With the right repayment plan, businesses can use term loans to purchase necessary assets and better manage their cash flow.

Glossary Index