Business Banking. Term Loans

Term loans are long-term obligations, versed as one-time deposits that must be repaid within a set timeframe. A fixed payment schedule must be provided at the time the loan is extended. The borrowed funds must be used to improve the business and are great for one-time investments such as purchasing equipment, remodeling the space, hiring consultants etc... For example, a restaurant borrows $50,000 for 6 years at 5APR to build a patio and is supposed to repay in $805 monthly payments.

When considering a term loan request the bank will look at the following factors:

• The revenue of the business

• Net profit (the net profit must cover the living expenses of the owners and have room for monthly loan payments)

• Length in business (typically at least 2 years under the same ownership is required)

• Assets of the business (typically the business must have some reserve working capital to qualify)

• The business credit score

• The credit score of the guarantor(s)

• The assets of the guarantor(s)

• The purpose

• The industry of the business. High risk industries will be scrutinized more heavily or be outright rejected.

When choosing a term loan lender companies should consider the following:

• interest rates

• origination fees (some banks charge a one-time fee when the loan documents are signed)

• terms (longer the terms more interest you will pay but lower your monthly payments will be)