Monthly-Term Business Loans
How Do Mid-Term Business Loans Work?
Mid-term business loans generally have repayment terms between one to five years and carry interest from 10% to 40% APR. These loans require a better credit score, higher revenues, and longer time in business than short-term loans. However, they also have lower APRs, longer repayment terms, and lower monthly payments. Plus, they can be funded in about one week.
Medium-term business loans are great for business owners that want quick capital and are willing to trade for fast approval, lower underwriting guidelines vs SBA 7a but the tradeoff is higher interest rates. Mid-Term loans are also a better choice than Short-Term Loans because for a little more work you can save a lot in financing
Mid-Term Loans: The Fundamentals
If your business has grown past the startup phase, a medium-term loan could be a great option. A medium-term business loan often has a lower APR and longer repayment term ― typically one to five years ― than a short-term business loan. These loans are a good way to finance equipment or growth capital for your business.
The Different Kinds of Business Term Loans Available
Two of the more popular lenders that provide medium-term alternative business loans are Fundation and ACFA. Each has an easy online business loan application process and can get you funded in around one week.
Fundation is particularly great for businesses with strong EBITDA (growth). Not only that, but it is designed to be veteran friendly, providing better alternative lending options to businesses owned by veterans or family members of veterans. ACFA is another great option for more established businesses that are looking to borrow larger amounts.
Large banks are starting to get into the mix with offering up to $100K, low doc, application only, medium-term bank loans for business owner with a 700 FICO score or better.
Traditional business term loans are a wide category of business financing, available both from traditional banks and alternative non-bank lenders.
Applying for a Mid-Term Business Loans
The application process for medium-term business loans is completed online through BitX Funding website. You will be prequalify for these loans in a matter of minutes and have the full application for the loan submitted in less than an hour. Approval typically occurs within two to three business days, and funding is generally received in a week.
Documentation requirements for all alternative lending options in this list vary and most have minimal requirements. When applying for a medium-term business loan, the lender will likely require documentation beyond your basic personal and business information. To complete your application, you can expect to turn in personal and business tax returns, bank statements, an income statement, also known as, profit & loss (P&L) statement, and your current balance sheet.
When Should You Use a Mid-term Loans?
The point of a Mid-Term business loan: to help you finance something big for your business that will require a longer ROI where a Short-Term loan would not support the goal.
Whether you need to make a specific equipment or inventory purchase, want more working capital, need to refinance other business debts, are looking to meet tax or payroll obligations, or something else entirely, a Mid-Term business term loan can help you out.
And as it turns out, there are few loan use restrictions, if any—though it’s best practice to spend that money creating more revenue for your business.
Since borrowing isn’t free, you want to come out of a loan with more money than you began with. It’s all in the planning ahead.
If used the right way, traditional term loans can help you push your business to the next level—introducing new equipment, locations, products, or marketing campaigns into your toolbox.
Plus, remember that a business term loan is predictable.
You should be able to figure out whether a term loan will help or hurt your business from the get-go. Just understand the calculations beforehand and plan the coming months or years of spending carefully.
What Will a Mid-Term Business Loans Cost You?
You should know how much the financing will cost you no matter what type of financing you’re applying for.
Thankfully, the price tag of a business term loan is easy to figure out, and it tends to be affordable.
Let’s look at a cost example.
Example of a Mid-Term Business Loan
Let’s say you’ve qualified for a business term loan.
In this medium-term business loan offer, you’re borrowing $25K from a lender at a 18% interest rate and a 5-year term.
Given the longer length of that traditional term loan, you’ll most likely have a monthly payment of about $634.
That’s a predictable expense you can easily understand and plan your financials around.
Small business term loans, like other business loans, can also come with fees attached to the loan. These fees could be origination fees, packaging fees, prepayment fees, and so on.
Don’t overlook fees on your loan offer—be sure to factor any and all small fees you might have to pay in order to understand the true cost of your loan.
Long-term Business Loans
Long-term business loans are a business financing option for established businesses that require a large amount of capital at lower interest rates for growth. You can repay for one year or longer, typically in monthly installments. The advantages of the long-term business loan are low interest rates and more convenient payments because payments are spread out for a long time of period.
A long-term business loan provides a sum of money to a business holder, which he can use for any purpose. The best thing is that it includes the working capital, buying equipment, expanding a property, and various other business needs. Business owners rely on funding options to fuel the business requirements for growth and success.
Breaking Down Each Term Loan Payment
Rates and terms for medium-term alternative business loans vary. The general terms for these types of business loans include loan amounts up to $500,000, APR between 10% to 40%, and repayment terms of one to five years. The lender will likely charge an origination fee between 0% to 9%, and you can expect funding within one week.
The typical rates and terms that you will encounter with a medium-term alternative business loan are:
Loan amounts: Range from $5,000 to $500,000
Time to funding: Generally, takes about one week to fund
Expected APR: 10% to 40%
Origination fees: 0% to 9%
Repayment term: One to five years
Example of a $25K, 5-year term Loan, 18% interest rate = $634 a month