What You Need to Know About Term Loans
According to research, it has been noted that most business will know to see their eighteenth months of life before they fail. It is also essential to know that just a third of small businesses will endure for the first ten years which is a concerning issue. It has been noted that business are failing due the lack of adequate capital to grow and run their ventures. There is the need to ensure that you have the all the available sources of funding that you can get in the market as an entrepreneur. 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. There is the need to ensure that you know that the interest on a term loan is either floating or the fixed charged one. You need to be aware that the repayment amount that you give covers for the interest charged and a part of the principal amount that you borrowed. There is the need to know that there are usually preset fees that you need to ensure that you honor which adds to your total loan balance. The best thing to do therefore is to ensure that you ask about these fees before you choose to apply 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. The repayment schedule of any term loan requires the borrower to make each payment on a specific date and failure it attracts a penalty.
The other thing that you need to know is that these loans can be put into three classes. First, there 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 category is the medium-term loans. These are the loans that takes a borrower two to five years to pay. One condition for a medium-term loan is that you need to have good credibility. Finally it is the long term loans. With these loans, the borrow have access to millions of dollars and the repayment schedule is between five to twenty-five years.