These loans are among the most consistently popular products in the small business financing world. They are ideal for borrowers who need money on a faster timeline and either don’t qualify for an SBA Loan or don’t have the time to wait for their infamously long approval process to unfold.
Once you’ve submitted your application, you can expect a pre-approval within a week and the funding usually becomes available within 8-12 weeks. Most lenders will require collateral for your bank term loan. This means the loan is secured, and if you were to default on the payments, the lender could take possession of whatever assets you used as collateral. Common examples of collateral include vehicles, homes, real estate, or equipment.
What Is a Term Loan?
While they don’t move as quickly as a short term loan, bank term loans offer unique benefits of their own. For example, they have much higher maximum amounts. Short term loans typically top off at $1 million but bank term loans can potentially go as high as $5 million.
Interest rates on bank term loans can start as low as 7.99%, though the exact rate will depend on your financial history and business circumstances. You should plan on a repayment term of 2-5 years.
These loans are structured with monthly payments. There’s typically no penalty for prepayment, which allows you to get ahead of schedule when you have available capital in order to save money on interest.
Another benefit of bank term loans is the fact that they have fixed interest rates. Because the rate won’t increase over the course of the repayment term, you’ll be able to precisely calculate how much the loan will cost. This greatly improves your ability to stay within your budget.