What You Need to Know About Term Loans
With the many statistics that have been carried out, it has been noted that most of the small enterprises do not live to see their eighteenth month of existence. There is the need to understand that a tiny part of the of small companies will go beyond the ten years of existence since they are established. It has been noted that business are failing due the lack of adequate capital to grow and run their ventures. As a business person, there is the need to ensure that you know of the funding options that are available for you. It is important to be aware of the term loans as they are a good source of capital for many ventures.
By term loan it means that as a borrower you will get a specific lump sum amount from a lender that you will pay back through a provided repayment schedule. It is also vital to know that the interest charged can either fixed or a floating one. It is crucial to understand that the repayment amount you make will go to pay for the interest and a portion of the principal loan that you got. There are predetermined fees that a borrower has to the owner when it comes to term loans. It is essential to ensure that you as a borrower, you get to know about these fees by asking of the lender when applying for the loan.
There is the need to know that the term loan lender requires that you have the guarantee insured. There is the need to know that when it reaches a point where you cannot pay for the insurance, the lender will give you advance to assist in the payment on the collateral insurance. The downside to this is that the money given as advance will be added to your loan and it will attract an additional penalty. There is the need to know that with the term loan repayment schedule, the borrower is required to ensure that he make a certain amount payment in a given date and delay attract penalties.
Term loans can be specified in three categories. The first category are the short term loans. With these types of loans, they typically take about one to two years for them to be paid. As a result of them being short, there is the need to know that this category of term loan attracts high interest. The second classification is the medium-term loans. These are the loans that takes a borrower two to five years to pay. For one to qualify for the medium-term loan, your credit scores should be great. Thirdly, there are the long term loans. These are loans that will take you more than five years to repay and involves millions of dollars.