As a small business owner, there are a growing number of financing options available to you, from business credit cards to receivables financing to business equipment leases, and more. If you’re just starting to research business financing options, you’re likely most familiar with a bank term loan. Read on to learn how a bank term loan works, and when other options may be a better fit for your business.
What is a bank term loan?
Bank term loans are issued by a bank and have long-term repayment plans – typically extending beyond one year. These loans normally come with fixed interest rates, and they allow banks to distribute funds in a way similar to lines of credit. Business owners can use bank term loans to draw funds as needed and must pay a fixed amount based on the remaining balance.
What are the different types of bank term loans?
Long-term bank term loans can run for as long as 10 or 20 years, and they often require collateral. Bank term loans can also run for much shorter periods, however, such as two to three years. Banks often refer to the shorter-term options as intermediate term loans.
How long does it take to apply, and how much does it cost?
This depends entirely on your bank, but you can expect the process to take several weeks. After filling out your application, the bank will conduct a full credit analysis of both you and your business. They’ll also analyze your holdings, revenue, cash flow and other financial factors.
Why do businesses obtain bank term loans?
Bank term loans are used for many different reasons, and are entirely dependent on the business in question. Common uses include purchasing real estate, a new facility, or equipment.
What is the difference between a bank term loan and an OnDeck loan?
A bank-term loan is dependent on your personal credit, and banks tend to lend to more established businesses looking for large loan amounts. OnDeck, on the other hand, looks at a variety of factors – not just personal credit – to evaluate the health of a small business. With our streamlined loan application process, you can receive funding in as fast as one business day. Learn more about how a loan from OnDeck works.
A bank term loan might be an option for you, but always make sure to fully evaluate what works best for your business.