A small business loan term is the lifetime of the loan, or how long the borrower will pay back the loan and interest. the borrower and the lender establish a schedule to determine how much will be paid monthly or weekly in some cases. Also called repayment terms, loan terms can range from a few months to 25 years.
Small business loans come in several varieties, and your loan term will depend on what kind of loan you get.
If you’re not sure what you need, Llama Loan is here to help. We simplify the process of applying for loans so you can focus on what you do best: your business.
Traditional business loans usually come in short-term (three months to two years), mid-term (two to five years) or long-term (up to 10 years) lengths. Requirements and details vary by lender, and these loans are available from traditional banks and online lenders.
Inventory financing is similar to equipment financing in that these loans allow a business to buy more inventory. Interest rates tend to be high, and term lengths are short. The idea is to purchase the inventory you know will sell quickly. The inventory serves as the collateral for the loan.
Alternatively, you can sell your loans to an invoice factory, which collects on the invoices itself.
Because these loans are repaid based on daily sales, many factors required to qualify for most business loans don’t apply. Factors like time in business or having large collateral may not be an issue if you can show you have the sales to repay the loan.
These loans typically come from community lenders that serve a particular area or underserved communities. The Small Business Administration (SBA) has microloan programs for veterans, women, low-income borrowers and minorities.
The U.S. Small Business Administration (SBA) offers several loan programs. The 7(a) loan programs have several short and long financing options. The details of what the loan will look like depend on the program.
Most of the time, you can’t pick any loan term you want. You will have to look at what lenders offer you. However, you can narrow down the types of loans and the lenders that offer loan terms that are best for you.
The first thing you should do is evaluate what your business funding needs are. You may want to ask yourself questions like:
These questions will help you make strategic decisions when financing your business. You need to balance several factors when finding the right small business loan term. A shorter loan will generally have larger payments while a longer term will spread the amount out over time. You don’t want a short-term loan that you may miss payments on or that causes unneeded financial stress. However, you don’t want a term that is longer than necessary because you’ll pay more in interest.
Llama Loan can help you easily compare options to decide which loan is ideal for your situation. We make it simple to compare loan terms so you can spend less time searching for loan options and spend more time on running your business.