Best Term Loans for Your Business

How To Get A Term Loan For Your Business

Term loans are what most people think of when they hear the word “loan.” A term loan has a fixed interest rate and a set maturity date, with payments usually made on a monthly basis. Term loans can be used for business financing just as they can be used for personal loans. However, rates and terms can vary dramatically based on the credit quality and financial strength of the borrower. Different lenders may offer varying loan programs as well. For certain businesses, the Small Business Administration may be of assistance, while for others, alternative sources of capital may be the best option. Here’s a look at seven types of borrowers and which funding type might be the best option to use when searching for term loans for business.

Startups

How to Get a Term Loan for a Startup

Term loans can be a good option for startup companies because they have clearly defined payment and maturity schedules. However, it can be hard for startups to get term loans from large, traditional lenders. This is because a new business is by definition a riskier investment for lenders. Although you can try to get your startup financed at a well-known bank, you might have better luck using an alternative source of capital. Companies like Seek Business Capital were created specifically to help new or startup companies get funded, and they can be a good place to start your search for a term loan.

How Does It Work?

A term loan is the type of traditional loan that is familiar to most people. Lenders make payment to borrowers, who pay back the principal amount plus interest over time, usually on a monthly basis. Term loans can be short-, medium- or long-term. Interest rates generally vary based on the maturity length selected.

Rates and eligibility for a term loan are primarily based on the credit profile of the borrower. In the case of a startup business, this history may be short or nonexistent. In this case, working with a company like Seek Business Capital that specializes in newer companies can increase your success of getting funded.

What Are the Rates?

Loan rates for a startup company seeking a term loan can be high. However, they can still be lower than some other unsecured funding sources, like a credit card. Companies like Seek Business Capital may offer 0% APY promotional rates to get companies off the ground before those loans reset to higher rates. If you have a high credit score yourself and are willing to give a personal guarantee, you may qualify for lower rates. Otherwise, term loan rates for true startups can reach the high-single or low-double digits.

Am I Eligible?

Eligibility for a term loan for startup companies can be tricky. Lenders generally prefer to see years of corporate financial records that show a business with solid and rising cash flow and profitability. As a startup, your financial history is likely limited. To be eligible for a term loan, you’ll likely need to head down one of two paths.

The first option is to work with an alternative source of capital, such as Seek Business Capital. Companies like this have special consultants that work specifically with newer companies that may have limited credit and financial histories. If a term loan isn’t available, these consultants can suggest other sources of financing to help keep your startup up and running.

Another way to become eligible for a term loan is to offer a personal guarantee. This can be particularly effective if you are a sole proprietor running your own company. With a solid credit score, cash reserves and a long history of paying back your debts, you may become eligible for a term loan for your company.

How Much Can I Get?

With all term loans, the amount you can get depends on your ability to pay back what you borrow. As a startup, since you have a limited credit and operating history, your maximum loan size may be limited. If you’re willing to offer a personal guarantee for your loan, the amount you can get may be higher.

Remember that loan offers aren’t personal judgments, they are mathematical expressions of risk. If a lender feels the level of risk with a loan is low, they’ll be willing to offer higher amounts at lower rates. If you present a risky credit profile — as startups often do — rates are typically higher, and loan amounts are lower.

Lenders like Seek Business Capital advertise loans of up to $500,000, but that doesn’t mean that your term loan as a startup will be — or should be — that high. You’ll generally only be approved for a six-figure loan if you have substantial cash reserves, a high income and/or a clear path to high profitability in your business.

The best way to approach a term loan is not to ask how much you can get, but rather to determine how much you need. If you overextend yourself on your first loan as a startup, a few bad months of business is all it will take to drag you under. Without sufficient cash flow coming in, you won’t be able to support your monthly debt payments. Avoid this scenario by requesting a loan only in the amount you need.

What Documents Do I Need?

When applying for a term loan, particularly as a startup, you’ll want to assemble as much documentation as possible showing that you’re a low risk to lenders. Here are some of the documents that lenders will generally request when you apply for a business term loan:

• Personal information like your date of birth and Social Security number
• Your business credit report
• Your Social Security number and personal credit report, if you’re giving a personal guarantee
• Your intended use of the loan proceeds
• Employer identification number, or EIN

Beyond these basics, individual lenders may request their own additional documents, such as business licenses, permits, additional financial statements and your business plan.

At the very least, you’ll want to present a credit profile clear of any defaults or derogatory information. Any cash reserves or income that can be used to repay the debt should also be presented to improve your chances of approval.

What Are the Terms?

Term loans can be flexible depending on your needs as a business, but they typically come in standard maturities. For startup businesses, shorter-term loans are the norm, as longer-term loans are more risky for lenders. You might expect to find options for one-year, three-year and five-year loans as a startup. In some cases, you may be able to get a seven-year or longer loan, but that would be the exception rather than the rule.

Term loan payments are typically made automatically every month via direct debit from your bank account. Interest is factored in to the monthly payment, and the loan is satisfied in full upon the date of final payment at maturity.

As the lending landscape has become more competitive in recent years, loan origination fees and other costs are starting to fall by the wayside. Still, you should be sure to double-check your loan contract to ensure you’re not charged any excess fees. Look specifically for loans without prepayment penalties, as you don’t want to be charged an extra fee if you’re able to pay back your loan early.

Businesses With Bad Credit

How to Get a Term Loan for Companies With Bad Credit

If your company has bad credit, that’s not the best position to be in if you’re looking for a term loan. If you’ve either got too much debt or failed to make timely payments in the past, lenders will shy away from financing you as the risk is too great. In the best scenario, a term loan, when you can get one, will charge exorbitant interest rates, and you’ll be committed to making payments even if you have uncertain cash flow. A popular alternative option for financing bad credit companies is a merchant cash advance.

How Does It Work?

A merchant cash advance can be a good option for bad credit companies because your credit history isn’t a major factor in obtaining your funding. Rather, a merchant cash advance relies on the consistency and/or quality of your incoming credit and debit card receipts. Lenders will essentially front you the money from your incoming sales — hence the term cash advance — and you’ll pay that loan back with a percentage of your receipts.

For a company with irregular cash flow and/or poor credit, a merchant cash advance can be a good option because you’re not tied down to a flat, regular monthly payment. Let’s say you take out an MCA for $40,000 and commit to paying 20% of your incoming receipts. When sales are booming, you’ll start paying off your MCA faster. If sales slow, your monthly payment will go down as well, which can help avoid a cash crunch. With a regular term loan, you might be committed to paying $1,000 per month instead, which could restrict your cash flow if customers are slow to pay or if it’s a bad sales month.

What Are the Rates?

One of the major drawbacks of a merchant cash advance is that the rates are consistently high. However, for a company with bad credit, high rates are just part of the game. A term loan, if you could get it, would likely run in the 10% - 20% range. Although this is roughly the same as a merchant cash advance, you aren’t committed to a fixed monthly payment with an MCA.

The price structure of an MCA is a bit different than with a term loan. Rather than being quoted a flat interest rate, your MCA will be priced with a factor fee. Typical MCA factoring fees can run from about 1.14 to 1.18, equating to a mid-teens annual percentage rate. However, some MCA lenders can charge extremely high rates; you should avoid that type of financing at all costs.

An annual percentage rate in the mid-teens is fairly high as far as financing goes, but it’s lower than you would likely get on a credit card or a personal loan if you have bad credit. Plus, you won’t likely be paying back your MCA over a year or more. Ideally, you’ll pay off this type of financing relatively rapidly.

Note that some lenders adjust the factoring fee depending on how rapidly you pay back the MCA. If you generate some huge sales and start paying off your MCA rapidly, your rate may jump. Always deal with a reputable lender and get the complete terms of your MCA in writing. Most importantly, make sure you understand the ins-and-outs of your agreement.

Am I Eligible?

Part of the appeal of a merchant cash advance for bad-credit companies is that it’s easier for these types of businesses to get approval. A merchant cash advance application will be based on your cash flow and receipts as a business, rather than your credit. Essentially, your lender is banking on the sales your company generates and the reliability of your customers’ payments rather than your unsecured promise to pay back the money you borrow. Thus, you’ll likely be eligible for a merchant cash advance if your business has regular and/or high cash flow.

How Much Can I Get?

The size of your merchant cash advance will be directly related to the size and quality of your business sales. All loans are a balance of risk and reward, and no lender will extend you a loan that you’re unlikely to pay back in a timely fashion. If you generate $1,000 per month in sales, for example, and you’re looking for a $1 million cash advance, you’ll be out of luck. However, if your business pulls down $50,000 per month and you’re asking for a $10,000 MCA, you’ll likely have more luck.

In that sense, the sky’s the limit when it comes to the size of a merchant cash advance. The question you should ask is how much your business actually needs. Just because you can leverage your sales into a large MCA doesn’t mean you should. For starters, you’ll be leveraging your business and diverting your cash flow to the point where it could cripple your business. You should only request an MCA in the size that will help you generate revenue or pay for critical needs for your business.

What Documents Do I Need?

Although you’ll need to provide documentation to get your merchant cash advance, the requirements aren’t usually as onerous as with a full-fledged term loan. In fact, the rapidity with which an MCA can be funded is one of its main appeals. In many cases, you can apply for an MCA and have it funded within a single day, or even a matter of hours in some cases. The process can begin — and sometimes be completed — online in certain instances as well, although you may need an existing banking relationship to get that accomplished.

Documents you may be expected to present during a merchant cash advance application include the following:

• Your driver’s license
• Your business tax returns
• Your business accounts receivable statements or documentation
• A voided business check
• A credit card processing statement

You may also have to provide bank statements or additional information, such as your tax EIN, per the request of each individual lender.

What Are the Terms?

Merchant cash advances are different from term loans in that there isn’t a set maturity structure and monthly payment. In fact, even the interest rate on your MCA may vary over time. Rather than making traditional payments, your lender will take a certain percentage of your incoming receipts to pay off the MCA. For example, if you take out a $100,000 MCA, your lender may siphon off 15% of your incoming monthly sales until the principal amount, plus the factoring fee, are paid in full. Thus, the amount you pay towards your outstanding debt may rise and fall on a monthly basis, depending on the amount of your incoming receipts.## Businesses With Bad Credit

How to Get a Term Loan for Companies With Bad Credit

If your company has bad credit, that’s not the best position to be in if you’re looking for a term loan. If you’ve either got too much debt or failed to make timely payments in the past, lenders will shy away from financing you as the risk is too great. In the best scenario, a term loan, when you can get one, will charge exorbitant interest rates, and you’ll be committed to making payments even if you have uncertain cash flow. A popular alternative option for financing bad credit companies is a merchant cash advance.

How Does It Work?

A merchant cash advance can be a good option for bad credit companies because your credit history isn’t a major factor in obtaining your funding. Rather, a merchant cash advance relies on the consistency and/or quality of your incoming credit and debit card receipts. Lenders will essentially front you the money from your incoming sales — hence the term cash advance — and you’ll pay that loan back with a percentage of your receipts.

For a company with irregular cash flow and/or poor credit, a merchant cash advance can be a good option because you’re not tied down to a flat, regular monthly payment. Let’s say you take out an MCA for $40,000 and commit to paying 20% of your incoming receipts. When sales are booming, you’ll start paying off your MCA faster. If sales slow, your monthly payment will go down as well, which can help avoid a cash crunch. With a regular term loan, you might be committed to paying $1,000 per month instead, which could restrict your cash flow if customers are slow to pay or if it’s a bad sales month.

What Are the Rates?

One of the major drawbacks of a merchant cash advance is that the rates are consistently high. However, for a company with bad credit, high rates are just part of the game. A term loan, if you could get it, would likely run in the 10% - 20% range. Although this is roughly the same as a merchant cash advance, you aren’t committed to a fixed monthly payment with an MCA.

The price structure of an MCA is a bit different than with a term loan. Rather than being quoted a flat interest rate, your MCA will be priced with a factor fee. Typical MCA factoring fees can run from about 1.14 to 1.18, equating to a mid-teens annual percentage rate. However, some MCA lenders can charge extremely high rates; you should avoid that type of financing at all costs.

An annual percentage rate in the mid-teens is fairly high as far as financing goes, but it’s lower than you would likely get on a credit card or a personal loan if you have bad credit. Plus, you won’t likely be paying back your MCA over a year or more. Ideally, you’ll pay off this type of financing relatively rapidly.

Note that some lenders adjust the factoring fee depending on how rapidly you pay back the MCA. If you generate some huge sales and start paying off your MCA rapidly, your rate may jump. Always deal with a reputable lender and get the complete terms of your MCA in writing. Most importantly, make sure you understand the ins-and-outs of your agreement.

Am I Eligible?

Part of the appeal of a merchant cash advance for bad-credit companies is that it’s easier for these types of businesses to get approval. A merchant cash advance application will be based on your cash flow and receipts as a business, rather than your credit. Essentially, your lender is banking on the sales your company generates and the reliability of your customers’ payments rather than your unsecured promise to pay back the money you borrow. Thus, you’ll likely be eligible for a merchant cash advance if your business has regular and/or high cash flow.

How Much Can I Get?

The size of your merchant cash advance will be directly related to the size and quality of your business sales. All loans are a balance of risk and reward, and no lender will extend you a loan that you’re unlikely to pay back in a timely fashion. If you generate $1,000 per month in sales, for example, and you’re looking for a $1 million cash advance, you’ll be out of luck. However, if your business pulls down $50,000 per month and you’re asking for a $10,000 MCA, you’ll likely have more luck.

In that sense, the sky’s the limit when it comes to the size of a merchant cash advance. The question you should ask is how much your business actually needs. Just because you can leverage your sales into a large MCA doesn’t mean you should. For starters, you’ll be leveraging your business and diverting your cash flow to the point where it could cripple your business. You should only request an MCA in the size that will help you generate revenue or pay for critical needs for your business.

What Documents Do I Need?

Although you’ll need to provide documentation to get your merchant cash advance, the requirements aren’t usually as onerous as with a full-fledged term loan. In fact, the rapidity with which an MCA can be funded is one of its main appeals. In many cases, you can apply for an MCA and have it funded within a single day, or even a matter of hours in some cases. The process can begin — and sometimes be completed — online in certain instances as well, although you may need an existing banking relationship to get that accomplished.

Documents you may be expected to present during a merchant cash advance application include the following:

• Your driver’s license
• Your business tax returns
• Your business accounts receivable statements or documentation
• A voided business check
• A credit card processing statement

You may also have to provide bank statements or additional information, such as your tax EIN, per the request of each individual lender.

What Are the Terms?

Merchant cash advances are different from term loans in that there isn’t a set maturity structure and monthly payment. In fact, even the interest rate on your MCA may vary over time. Rather than making traditional payments, your lender will take a certain percentage of your incoming receipts to pay off the MCA. For example, if you take out a $100,000 MCA, your lender may siphon off 15% of your incoming monthly sales until the principal amount, plus the factoring fee, are paid in full. Thus, the amount you pay towards your outstanding debt may rise and fall on a monthly basis, depending on the amount of your incoming receipts.

Companies With Good Credit

How to Get a Term Loan for Companies With Good Credit

With good credit, the world of corporate financing opens up for your business. Good-credit businesses have access to more types of funding at better rates, and this flexibility can help you manage the cash flow of your business more effectively. Top-tier credit companies can often get the best available rates in the most convenient fashion, via online term loans.

How Does It Work?

The explosion in internet banking has given businesses and individuals alike much greater access to online financial services, including loans. With good credit, you can apply for a business term loan online and get a response in minutes regarding the status of your loan. In some cases, funding may arrive in 24 hours or less after that. It’s easier to get an online loan with good credit, and many financial institutions can let you know what type of loan you’ll be approved for online without even running a business credit check.

What Are the Rates?

Term loans can carry high rates, but the lowest APYs are available for companies with good credit. Top-tier companies may be able to get rates as low as 5%, although 7% to 9% may be more likely depending on the lender and the nature of your good credit. These rates are much lower than your business could get with a business credit card, for example, or via a merchant cash advance. Since businesses with top-tier credit are sought after by lenders, you should be able to shop around and leverage your good credit to get the best available rates.

Am I Eligible?

Eligibility for term loans is based on the quality of your credit history and your ability to repay your loan. As a company with good credit, you’ll likely be eligible for a term loan from a wide variety of lenders. The one snag could be if your company doesn’t have the financial capacity to handle regular loan payments. However, if your company does have good credit, it means you have been making prior payments on time and likely have a sufficient income stream to handle a new term loan.

How Much Can I Get?

When determining the size of your term loan, lenders will look at the financial capacity of your company. If your company has good credit and sizable, consistent cash flow, you’ll likely qualify for the highest available loan amounts. For business term loans, limits may run as high as $500,000 or even more. However, these levels are limited to companies with copious amounts of cash flow and profits. You should consult with your tax and/or financial advisors to help you determine what an appropriate loan amount would be for your company. Just because you have access to a six-figure term loan doesn’t mean you should take one out in that size. Overextending yourself financially could end up crippling your company in the long run, so be sure to tailor your loan request to an amount that your company can pay back with room to spare.

What Documents Do I Need?

With your company’s good credit, you may be able to complete the entire term loan application process online, particularly if you already have a banking relationship with a particular financial institution. Approval and funding can be very rapid if you go the online route. However, you’ll still need to provide documentation to get approved. Here are typical documents that an online term loan provider might request during the application process:

• Business income and net worth statements
• Total debt payments
• Business balance sheet
• Business bank accounts
• Profit and loss statement
• Employer identification number, or EIN

Depending on the online lender and your personal involvement, you might also be asked for your driver’s license, Social Security and personal financial information, such as tax returns.

What Are the Terms?

If you apply for a term loan online, you can usually choose the maturity you like. Common maturities range from one to five years. In some cases, you may be able to take out a seven- or even 10-year loan, but that’s up to the individual lender. Payments on your term loan will usually be made monthly via auto-debit from your business checking account. Some institutions may charge setup or maintenance fees, so try to search out lenders with good rates that charge no such fees.

The online term loan market has grown quite competitive, and that works to your advantage. Particularly as a business with good credit, you should be able to shop around and negotiate with lenders to get the best rates and terms for your business term loan.## Companies With Good Credit

How to Get a Term Loan for Companies With Good Credit

With good credit, the world of corporate financing opens up for your business. Good-credit businesses have access to more types of funding at better rates, and this flexibility can help you manage the cash flow of your business more effectively. Top-tier credit companies can often get the best available rates in the most convenient fashion, via online term loans.

How Does It Work?

The explosion in internet banking has given businesses and individuals alike much greater access to online financial services, including loans. With good credit, you can apply for a business term loan online and get a response in minutes regarding the status of your loan. In some cases, funding may arrive in 24 hours or less after that. It’s easier to get an online loan with good credit, and many financial institutions can let you know what type of loan you’ll be approved for online without even running a business credit check.

What Are the Rates?

Term loans can carry high rates, but the lowest APYs are available for companies with good credit. Top-tier companies may be able to get rates as low as 5%, although 7% to 9% may be more likely depending on the lender and the nature of your good credit. These rates are much lower than your business could get with a business credit card, for example, or via a merchant cash advance. Since businesses with top-tier credit are sought after by lenders, you should be able to shop around and leverage your good credit to get the best available rates.

Am I Eligible?

Eligibility for term loans is based on the quality of your credit history and your ability to repay your loan. As a company with good credit, you’ll likely be eligible for a term loan from a wide variety of lenders. The one snag could be if your company doesn’t have the financial capacity to handle regular loan payments. However, if your company does have good credit, it means you have been making prior payments on time and likely have a sufficient income stream to handle a new term loan.

How Much Can I Get?

When determining the size of your term loan, lenders will look at the financial capacity of your company. If your company has good credit and sizable, consistent cash flow, you’ll likely qualify for the highest available loan amounts. For business term loans, limits may run as high as $500,000 or even more. However, these levels are limited to companies with copious amounts of cash flow and profits. You should consult with your tax and/or financial advisors to help you determine what an appropriate loan amount would be for your company. Just because you have access to a six-figure term loan doesn’t mean you should take one out in that size. Overextending yourself financially could end up crippling your company in the long run, so be sure to tailor your loan request to an amount that your company can pay back with room to spare.

What Documents Do I Need?

With your company’s good credit, you may be able to complete the entire term loan application process online, particularly if you already have a banking relationship with a particular financial institution. Approval and funding can be very rapid if you go the online route. However, you’ll still need to provide documentation to get approved. Here are typical documents that an online term loan provider might request during the application process:

• Business income and net worth statements
• Total debt payments
• Business balance sheet
• Business bank accounts
• Profit and loss statement
• Employer identification number, or EIN

Depending on the online lender and your personal involvement, you might also be asked for your driver’s license, Social Security and personal financial information, such as tax returns.

What Are the Terms?

If you apply for a term loan online, you can usually choose the maturity you like. Common maturities range from one to five years. In some cases, you may be able to take out a seven- or even 10-year loan, but that’s up to the individual lender. Payments on your term loan will usually be made monthly via auto-debit from your business checking account. Some institutions may charge setup or maintenance fees, so try to search out lenders with good rates that charge no such fees.

The online term loan market has grown quite competitive, and that works to your advantage. Particularly as a business with good credit, you should be able to shop around and negotiate with lenders to get the best rates and terms for your business term loan.

How to Get a Term Loan for Companies With Short-Term Needs

How to Get an SBA Loan for Companies With Fixed Assets

Companies that have short-term financing needs will often find that a term loan is the best option. Whether you have a short-term cash flow problem or are financing a short-term development project, a term loan with a maturity of one or two years may be the solution.

How Does It Work?

A short-term business or project loan is simply a term loan that’s designated for a specific, near-term purpose. Generally, a short-term loan’s maturity will approximate or match the time period of the project that’s being financed. These types of loans can be easier to get because they’re short maturity exposes a lender to less risk. However, your company’s financial strength and credit history will also play a critical role both in your eligibility and your interest rate.

What Are the Rates?

Rates on a short-term project loan can range from 5% to 10% or more. Although the short maturity of the loan can help keep rates towards the low end, if your company has bad credit, you might still be facing double-digit interest rates.

Am I Eligible?

Eligibility for short-term project or financing loans will depend on your company’s financial strength and credit history, in addition to the nature of the project itself. If you’re using the money to invest in an asset that will begin generating revenue for your company, you might find it easier to obtain financing than if you were simply using the funds for general, unsecured purposes.

How Much Can I Get?

The amount of your short-term project loan will be tied to the needs of your investment. If you’re expanding your plant and you’ll need $100,000, for example, you won’t receive more than that in financing. Certain lenders may be able to provide you with hundreds of thousands of dollars in financing, but that will depend on your use of the funds and your company’s financial strength. An important thing to consider is that for a short-term loan, you might only be making 12 or fewer payments. If you take out a loan for $100,000 or more, your monthly payment may approach $9,000 or $10,000. Weigh the use of your loan proceeds against the strain on your cash flow going forward.

What Documents Do I Need?

A short-term loan may seem like an informal financial arrangement, but you’ll need to qualify for the loan just as you would with any other term loan. You’ll still want to put your best financial foot forward to get the best loan payment terms and rates you can. Here are some of the documents you should expect to provide when you apply for a short-term loan:

• Business income statement
• Business net worth statement
• Statement of total outstanding debt
• Business balance sheet
• Business bank accounts
• Business P&L statement
• Employer identification number, or EIN

If you’re financing a short-term project, you’ll likely be asked for the financial details of the project as well. Depending on the online lender and your personal involvement, you might also be asked for your driver’s license, Social Security and personal financial information.

What Are the Terms?

Short-term loans generally run for 12 months or less, although some may extend to two years. Many short-term loans now carry no fees, especially if applied for online. However, other loans may charge setup or prepayment fees.

Companies With Long-Term Financing or Project Needs

How to Get a Term Loan for Companies With Good Credit

With good credit, the world of corporate financing opens up for your business. Good-credit businesses have access to more types of funding at better rates, and this flexibility can help you manage the cash flow of your business more effectively. Top-tier credit companies can often get the best available rates in the most convenient fashion, via online term loans.

How Does It Work?

The explosion in internet banking has given businesses and individuals alike much greater access to online financial services, including loans. With good credit, you can apply for a business term loan online and get a response in minutes regarding the status of your loan. In some cases, funding may arrive in 24 hours or less after that. It’s easier to get an online loan with good credit, and many financial institutions can let you know what type of loan you’ll be approved for online without even running a business credit check.

What Are the Rates?

Term loans can carry high rates, but the lowest APYs are available for companies with good credit. Top-tier companies may be able to get rates as low as 5%, although 7% to 9% may be more likely depending on the lender and the nature of your good credit. These rates are much lower than your business could get with a business credit card, for example, or via a merchant cash advance. Since businesses with top-tier credit are sought after by lenders, you should be able to shop around and leverage your good credit to get the best available rates.

Am I Eligible?

Eligibility for term loans is based on the quality of your credit history and your ability to repay your loan. As a company with good credit, you’ll likely be eligible for a term loan from a wide variety of lenders. The one snag could be if your company doesn’t have the financial capacity to handle regular loan payments. However, if your company does have good credit, it means you have been making prior payments on time and likely have a sufficient income stream to handle a new term loan.

How Much Can I Get?

When determining the size of your term loan, lenders will look at the financial capacity of your company. If your company has good credit and sizable, consistent cash flow, you’ll likely qualify for the highest available loan amounts. For business term loans, limits may run as high as $500,000 or even more. However, these levels are limited to companies with copious amounts of cash flow and profits. You should consult with your tax and/or financial advisors to help you determine what an appropriate loan amount would be for your company. Just because you have access to a six-figure term loan doesn’t mean you should take one out in that size. Overextending yourself financially could end up crippling your company in the long run, so be sure to tailor your loan request to an amount that your company can pay back with room to spare.

What Documents Do I Need?

With your company’s good credit, you may be able to complete the entire term loan application process online, particularly if you already have a banking relationship with a particular financial institution. Approval and funding can be very rapid if you go the online route. However, you’ll still need to provide documentation to get approved. Here are typical documents that an online term loan provider might request during the application process:

• Business income and net worth statements
• Total debt payments
• Business balance sheet
• Business bank accounts
• Profit and loss statement
• Employer identification number, or EIN

Depending on the online lender and your personal involvement, you might also be asked for your driver’s license, Social Security and personal financial information, such as tax returns.

What Are the Terms?

If you apply for a term loan online, you can usually choose the maturity you like. Common maturities range from one to five years. In some cases, you may be able to take out a seven- or even 10-year loan, but that’s up to the individual lender. Payments on your term loan will usually be made monthly via auto-debit from your business checking account. Some institutions may charge setup or maintenance fees, so try to search out lenders with good rates that charge no such fees.

The online term loan market has grown quite competitive, and that works to your advantage. Particularly as a business with good credit, you should be able to shop around and negotiate with lenders to get the best rates and terms for your business term loan.## Companies With Good Credit

How to Get a Term Loan for Companies With Good Credit

With good credit, the world of corporate financing opens up for your business. Good-credit businesses have access to more types of funding at better rates, and this flexibility can help you manage the cash flow of your business more effectively. Top-tier credit companies can often get the best available rates in the most convenient fashion, via online term loans.

How Does It Work?

The explosion in internet banking has given businesses and individuals alike much greater access to online financial services, including loans. With good credit, you can apply for a business term loan online and get a response in minutes regarding the status of your loan. In some cases, funding may arrive in 24 hours or less after that. It’s easier to get an online loan with good credit, and many financial institutions can let you know what type of loan you’ll be approved for online without even running a business credit check.

What Are the Rates?

Term loans can carry high rates, but the lowest APYs are available for companies with good credit. Top-tier companies may be able to get rates as low as 5%, although 7% to 9% may be more likely depending on the lender and the nature of your good credit. These rates are much lower than your business could get with a business credit card, for example, or via a merchant cash advance. Since businesses with top-tier credit are sought after by lenders, you should be able to shop around and leverage your good credit to get the best available rates.

Am I Eligible?

Eligibility for term loans is based on the quality of your credit history and your ability to repay your loan. As a company with good credit, you’ll likely be eligible for a term loan from a wide variety of lenders. The one snag could be if your company doesn’t have the financial capacity to handle regular loan payments. However, if your company does have good credit, it means you have been making prior payments on time and likely have a sufficient income stream to handle a new term loan.

How Much Can I Get?

When determining the size of your term loan, lenders will look at the financial capacity of your company. If your company has good credit and sizable, consistent cash flow, you’ll likely qualify for the highest available loan amounts. For business term loans, limits may run as high as $500,000 or even more. However, these levels are limited to companies with copious amounts of cash flow and profits. You should consult with your tax and/or financial advisors to help you determine what an appropriate loan amount would be for your company. Just because you have access to a six-figure term loan doesn’t mean you should take one out in that size. Overextending yourself financially could end up crippling your company in the long run, so be sure to tailor your loan request to an amount that your company can pay back with room to spare.

What Documents Do I Need?

With your company’s good credit, you may be able to complete the entire term loan application process online, particularly if you already have a banking relationship with a particular financial institution. Approval and funding can be very rapid if you go the online route. However, you’ll still need to provide documentation to get approved. Here are typical documents that an online term loan provider might request during the application process:

• Business income and net worth statements
• Total debt payments
• Business balance sheet
• Business bank accounts
• Profit and loss statement
• Employer identification number, or EIN

Depending on the online lender and your personal involvement, you might also be asked for your driver’s license, Social Security and personal financial information, such as tax returns.

What Are the Terms?

If you apply for a term loan online, you can usually choose the maturity you like. Common maturities range from one to five years. In some cases, you may be able to take out a seven- or even 10-year loan, but that’s up to the individual lender. Payments on your term loan will usually be made monthly via auto-debit from your business checking account. Some institutions may charge setup or maintenance fees, so try to search out lenders with good rates that charge no such fees.

The online term loan market has grown quite competitive, and that works to your advantage. Particularly as a business with good credit, you should be able to shop around and negotiate with lenders to get the best rates and terms for your business term loan.

Companies With 3-4 Years of Financials

How to Get a Term Loan for Companies With 3-4 Years of Financials

If you’ve made it past the startup stage but aren’t quite to the level of “long-term established company,” there’s a specialized type of term loan option that may be the best option for you. The Small Business Administration exists, at least in part, to help companies in this maturity stage get decent financing. The SBA 7(a) loan program could be just the ticket to getting your company a term loan.

How Does It Work?

Unlike generic term loans, the SBA 7(a) loan program was developed with specific rates and terms for small businesses. If your business is in the three-to-four year range, you likely fall smack in the target demographic for this program.

In spite of its name, the Small Business Administration itself doesn’t finance the small business loans in the SBA 7(a) loan program. Rather, the SBA acts as a conduit between borrowers and lenders. The program ends up being a win-win for both sides of the transaction, which isn’t always the case in a business arrangement. Borrowers are provided with willing lenders that may not otherwise offer them loans, while lenders are enticed into the program with the promise of an SBA guarantee. For financial institutions that makes loans through the program, the SBA guarantees up to 85% of the value of the loan in case the borrower defaults. This greatly reduces the risk for lenders and makes them much more willing to extend loans to borrowers through the program.

This risk of default doesn’t magically disappear because of the existence of the program, however. Rather, the SBA itself takes on the risk of up to 85% of 7(a) loans. Thus, not all businesses are eligible to participate. The SBA typically requires at least three years of financials from applicants before it will even consider them for entry into the program. This is why your business, with three-to-four years of operating history, could be a good fit for the SBA 7(a) loan program.

What Are the Rates?

With most term loans, you’ll have to go through at least part of the application process in order to find out your loan rate. The SBA 7(a) loan program eliminates most of this mystery by publishing its maximum allowable loan rates right on its website. Here are the current SBA 7(a) business loan terms:

Loans Less Than 7 Years

• $0 - $25,000 Prime + 4.25%
• $25,001 - $50,000 Prime + 3.25%
• $50,001+ Prime + 2.25%

Loans 7 Years or Longer

• $0 - $25,000 Prime + 4.75%
• $25,001 - $50,000 Prime + 3.75%
• $50,001+ Prime + 2.75%

For business with three-to-four years of operating history, these could be the best rates available, especially when compared with funding options such as a merchant cash advance or a business credit card.

Am I Eligible?

Eligibility for the SBA 7(a) loan program is far from guaranteed. If your business has three or four years of operating history, you’re at least in the phase in which many borrowers are approved. Still, the qualification requirements are relatively stringent, as both lenders and the SBA itself have to protect themselves from a high incidence of defaults.

Applying for an SBA 7(a) loan is somewhat like applying for a term loan directly with a bank, except the documentation and eligibility requirements are perhaps even more onerous. Although the SBA 7(a) program may make it easier for you to connect with a lender, you’ll still have to apply for the loan as if you were on your own. Additionally, you’ll have to meet certain SBA requirements.

Chief among the SBA’s requirements are that you have the ability to repay the loan, that you’re operating your business with a sound purpose to generate a profit, and that you are a “small” business. In addition, you’ll have to have your own money invested in your business, and you’ll have to show that you weren’t able to get financing from another institution.

So, what is a “small business” anyway? The SBA has some well-defined criteria for what comprises a small business. Generally speaking, you’ll need to have 100 or fewer employees and generate revenue of $1 million or less. However, this isn’t a blanket definition. In some larger industries, for example, you can generate revenue of as much as $41.5 million and still be considered “small.” In terms of employee count, some industries still maintain their “small” badge with as many as 1,500 employees. The bottom line is that you’ll have to verify your status using the SBA’s published criteria.

How Much Can I Get?

Although the SBA 7(a) loan program is for small businesses, the amount you can get can be quite high. The maximum loan amount permitted by the SBA is $5.5 million. However, just because you qualify for a 7(a) loan doesn’t mean you’re entitled to $5.5 million. As with any loan, your limit will be defined by a combination of underwriting criteria determined by your lender, such as your credit score and financial capacity. High cash reserves, consistent (and rising) cash flow and profitability all act as positive factors when determining your loan limit.

What Documents Do I Need?

The requirements of the SBA 7(a) loan program are extensive, and so is the documentation. For some borrowers, this can be one of the drawbacks of the 7(a) loan program, as it can take much longer to apply and get approved than with a simple online personal loan, for example. However, the tradeoff is that a 7(a) loan may be better than most if not all of your other options for a term loan. Considering the risk that the SBA incurs by guaranteeing a sizable portion of your loan, the documentation requirements seem reasonable.

All of your documentation requirements are designed to prove to the SBA and the lenders in the program that you’re a good credit risk that will pay back what you borrow. Along those lines, the SBA itself also requires borrowers to show that they are of good character and operating their businesses intending to earn a profit. Specific documentation requirements include the following:

• Borrower information form
• Business financial statement
• Business certificate or license
• Personal background and financial statement
• Business overview and history
• Loan application history
• Personal tax returns for the last three years
• Resumes for each principal in the management team
• Business lease

Additional documentation will usually be required if you intend to use your SBA 7(a) loan for the purpose of buying out an existing business.

What Are the Terms?

SBA loan terms are listed on the administration’s website. Maximum loan terms are 25 years, but only for real estate transactions. Standard SBA 7(a) loans run from five to 10 years. An important characteristic of the program is that loans exceeding seven years incur a 0.50% interest rate surcharge.

Established Companies With 5+ Years of Consistent Revenue

How to Get a Term Loan for Established Companies

Term loans can be a great option for established companies with long track records because their strong financials can earn them low interest rates. The truth of the matter is that long-established businesses with good credit histories can get nearly any type of financing they want, from business lines of credit to equipment financing loans, at low rates.

How Does It Work?

Long-established businesses can leverage their good credit and strong financial histories to negotiate good rates on a term loan. Generally, it’s an easy process for established companies to open new term loans as they likely have existing relationships with financial institutions.

What Are the Rates?

Long-standing companies often have good credit histories, and the combination of great financial success and good credit lead to low rates on loans. If you’re this type of company applying for a term loan, you should expect to be able to negotiate the lowest interest rate available. For a term loan, this might be a sub-5% rate.

Am I Eligible?

Companies that have thrived for at least five years can usually qualify for a term loan, and often at the best rates. Lenders offering term loans are looking for borrowers with significant cash reserves and consistent profitability, so if your company fits that profile, you’ll likely be able to snag a term loan.

How Much Can I Get?

No matter how long your business has been up and running, lenders will evaluate your loan size based on financial factors. Your credit history, cash reserves, profitability, income-to-debt ratio and other financial parameters will be paramount in determining your loan size. If your company generates $100 million in annual revenue, you can likely qualify for a multi-million dollar term loan if you so desire. However, if your company also has $200 million in outstanding debt, you might not qualify for much of a loan at all.

If you’re a company of size, balancing your debt load against your assets and revenue is critical. As a high-revenue company, you may feel as if you can borrow as much as you’d like, but if you overextend yourself financially your company could take a step backwards. Especially if you’re dealing with multi-million dollar amounts of assets and liabilities, it’s important to borrow only what you need, not all that you can get.

What Documents Do I Need?

Term loans often have extensive documentation requirements, as they are unsecured. If you already have a relationship with a bank, the application process for a term loan can usually be expedited because the bank will already understand your financial background and status. Still, the following type of documentation will likely be required, even if it is already on file:

• Business profit and loss statements
• Three-plus years of business tax returns
• Business net worth, balance sheet and cash flow statements
• Business bank statements
• Employer identification number, or EIN

Additional documentation requirements may vary from lender to lender.

In many cases, your application for a term loan for business must be completed in a branch office, although you may be able to begin the process online. However, as a well-established business, the more documents you provide, the more likely you are to be able to negotiate good terms and rates on your loans.

What Are the Terms?

Term loans generally run between one and five years. Companies with extensive histories may be able to negotiate longer or shorter terms, as their needs dictate. Shorter-term loans often have lower rates because they expose lenders to less risk

The Bottom Line

Term loans can be a great way for many businesses to obtain financing. The best rates and terms will be reserved for businesses with the best credit and the greatest financial strength. Companies without these characteristics can still get term loans, but the rates may be high. In that case, certain alternative financing options, from merchant cash advances to SBA loans, may be better choices. When searching for a loan for your business, be sure to explore all options to find the most flexible terms and the lowest rates that may be available.

FAQs

Term Loans For Business FAQs

Although the general structure of term loans is straightforward, the details behind how they operate are not always clear. Here’s a sample of some common questions about term loans for business.