What Is A Term Loan?

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A traditional term loan is a lump sum of cash you pay back, plus interest, over a fixed period of time.

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Term business loans are a standard debt financing facility with standard payments (usually monthly) with a maturity and amortization schedule, ranging from anywhere in 6 months to 30 years in length (depending on use). Term loan sizes for small and medium-sized businesses can be as small as a few thousand dollars, and can range up to $5,000,000 for loans with SBA-enhancements, and well above that for other traditional facilities. The repayment associated with most term loans are made monthly, although some alternative lenders will require payback be made on a weekly or even daily basis.

 

Term loans vary in size, structure and uses depending upon the commercial lending institution. A term loan from a bank may have a very different underwriting criteria than that of a mid prime lender that specializes in buying-out high-interest merchant cash advances. Term loans are usually collateralized with the borrowing company’s assets (building, land, equipment, accounts receivable, cash flow, etc.). While each lender has their own requirements, its common for a blanket lien to be placed on all the company’s assets when a term loan is provided to the business.

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While each lender is different, a term loan provided by a conventional, private investment bank or SBA-preferred lender usually requires and extensive amount of business and personal financial documentation for due diligence during the underwriting of the loan. Traditional commercial lenders will require that the business prove it has an acceptable debt-service-coverage-ratio to ensure the lender will get paid back.

 

 

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Qualifications

 

Yes

 

2 + years in business

 

Business Revenue must be $100,000 +

 

Business owners must be U.S. citizens or legal permanent residents

 

Business owners must have personal credit scores 620 or above

 

Cash flow to support loan payments

 

No

 

More than 2 NSF’s on current month’s bank statements or 5 in 90 days

 

Bankruptcies or foreclosures in the last 3 years

 

Prior default on government backed loans

 

Outstanding tax liens

 

Loan proceeds cannot be used for unpaid taxes

 

Flexible

 

Draw up to the max credit line whenever you want

 

Pre-pay with no fees

 

Every payment replenishes your available capital

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