Term loans are common business financing tools. These financing instruments offer loan periods of up to 10 years, and you can typically get amounts up to $1 million, depending on the lender. These loans can be used for a variety of different expenses, including hiring staff or purchasing assets. In addition, they have advantages over other financing options.

Interest Rates

Term loans have long loan periods. Therefore, their interest rates are typically lower than other loans. For example, you may only pay an APR of eight to 25%. Your collateral, credit and loan term will determine the amount of interest you pay. Also, whereas many commercial loans may have a fixed interest rate for a short period that eventually changes into an adjustable or variable rate, these loans have a fixed rate throughout the full term of the loan.

Taxes and Budgeting

A term loan is great for your budget because your payment amount never changes and is always due at the same time each month. Some lenders require biweekly payments, but you can anticipate them and work them into your budget. You will never be surprised by a payment or an increase in your payment amount. In addition, all your interest is tax-deductible.

Free Up Cash Flow

It’s not always a good idea to use your available cash flows for large investments, such as real estate, equipment, etc. These funds are typically used for normal operating expenses and saved for emergencies. Therefore, loan financing, especially term loan financing, can free up your cash flows and still allow you to make significant investments in your business. In addition, these loans can be used for a number of investments, such as staff hiring, equipment, staff training, etc.

Flexible Terms

Unlike many business loans, a term loan is negotiable. While banks and other financial institutions have preset interest rates, loan periods and loan amounts, these loans are more flexible. As your business and personal credit scores improve, you can negotiate better terms. Another benefit is that when you make your payments on time, your business and personal credit continue to grow, increasing your creditworthiness.

In addition, these loans have a quick approval process. Some business loans can take months to gain approval, but a term loan can be approved within two days. In addition, your equity shareholders’ interests are not affected by this type of debt financing.

If you are looking for a way to grow your business or invest in your human capital or machinery, do some research on term loans.