If you plan to open a small business or already have one that's up and running, you may need to secure financing to get the capital that's required to operate. Term loans for small businesses are available to help entrepreneurs like you succeed in the market by offering the money that's needed to cover specific expenses or day-to-day operating costs. Here are some of the most important things to know about small business term loans.
Offers a Lump Sum Payment
If you qualify for a term loan, the lender will likely offer you a lump sum payment so that you'll receive all the money at once instead of having to wait for multiple payments. Securing one of these loans is one of the best ways to obtain the capital that's needed to cover urgent expenses that need to be paid for you to continue to operate your business. You might even receive all the money on the day that you're approved for the loan.
A High Credit Score Is Often Not Required to Qualify
You may have a less-than-stellar credit score, and a small business term loan could be a better option than another type of loan. Some applicants have qualified for term loans for small businesses with credit scores of 600. You might even be able to still qualify for one of these loans if your credit score is less than 600.
Certain Documents Must Be Submitted to Qualify
A lender that offers small business term loans will require you to submit certain documents to qualify. As Investmentpedia.com explains, some of these documents may include:
- A written plan for how the money will be used
- Business tax returns for the past three years
- All business owners' personal financial statements
- Business financial statements for the past three years (with profit and loss statements and balance details)
Loans With Short, Medium, and Long Terms Are Available
It's possible to apply for a short-, medium-, or long-term loan with a term loan, and the term period that you choose will depend on how fast you can repay the money. With a short-term loan, you will generally be required to repay the money in one year or less, but some lenders will allow you up to one and a half years to satisfy the term. If you qualify for a medium-term loan, you will generally be given one to five years to repay the amount. You can choose to repay the loan over a period that's greater than five years if you choose to sign a long-term loan agreement.
Getting a short-term loan can give your small business the financial boost that it needs to get through troubling economic times. The best lenders that provide term loans for small businesses try to make the process of applying as easy as possible for small business owners.