Short and Long Term Loans for Small Business

By: Irish Taylor Click author's name for more of his/her articles

If you are a entrepreneur and planning to get a fund for your business, here is another option to consider, the term loans. In this article, learn about term loans as we discuss to you the basic points about term loans for small businesses.

Business startup financing

What is a term loan? Term loans have a fixed length of repayment period, lasting from a year to 20 years or more, depending on the type of loan you obtained. The amortization or the amount of repayment that the borrower would need to submit includes both the principal and interest of the loan.

Short Term Business Loans

Short term loans mature within a year or less and are ideal for growing businesses that need additional funding in the middle of operations. Lenders offers a number of short term business loans. Examples are working capital loans, accounts receivable loans, equity, lines of credit, etc. For instance, if a business needs funds to launch new marketing campaigns, buy more stocks, or hire additional workers, short term business loans provide an easy solution.

Long Term Business Loans

What about long term business loans? Obviously, this type of term loan takes a longer time to mature and complete. Long term business loans can have a 10-year, 20-year, to 30-year repayment period depending on the amount of money borrowed. Long term can range from from $25,000 to as much as $50,000 or more.

Long term business loans are more practical choice if you are in need of large money to start your business. Usually, term loans require collateral as a guarantee for the loan. lenders are more strict and cautious when giving their approval when it is a long term business loans which involves big cash.

Applicants for long term loans should be prepared to submit all the necessary documentations that the lender requires. Aside from the collateral, a professional business plan, along with business licensing certificates and accounts spreadsheets are often required to be submitted.

Your Business Credit History

Whether you're applying for a short term or long term business loan, the status of your credit plays an important role in getting approved for the loan. Thus, it is advised to check on your business credit report before submitting your loan application. Although, there are lenders who grant loans despite bad credit, these loans usually have higher interest rates and fees. On the opposite, an excellent business credit gives you the advantage of getting lower interest rates and faster approval from lenders.

But what if you haven't yet established your business credit history? In this case, your personal credit history would be used by your lender. Obtain a copy of your credit report to check on your credit score. Of course, a higher credit score makes you a more qualified candidate for a business loan while a low credit score puts you at a bad light. If you have a very low credit rating, it is best to work on your credit first before trying to apply for a business loan.

Copyright (c) 2009 Irish Taylor

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About The Author: Irish Taylor is a business loan consultant with Startup Business Loans and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to small business , SBA loans and term loans .