Is A Mid-Term Loan Right For You?
Whether you are dreaming about owning a small business or if you have already started making that dream a reality, you have most likely dreamed (or maybe had nightmares!) about financing.
As a savvy business owner, you may even have started doing your research on the seemingly endless types of business loans out there. A traditional type of business loan you may have come across is the “term loan.”
Term loans are a great option for small businesses looking for a traditional loan with a set repayment time frame and set payments. The type of term loan that you can receive will vary based on credit rating, cash flow, and many other factors.
While definitions vary, a medium-term loan is generally regarded as a loan with a payback period of about 1-5 years. Let’s look at a medium-term loan example.
A Medium-Term Loan Example
Maria of Maria’s Deli wants to purchase new kitchen equipment, including a new meat slicer, meat grinder, and a new refrigeration unit. All of the upgrades to her kitchen will cost her approximately $15,000. Maria applies for and receives a medium-term loan with a 9% interest rate and a 3% origination fee. Maria will need to pay the loan off in four years, so her monthly payment will be $373.28. The cost of the loan or interest is $3,367.23 unless Maria pays off the loan early.
Because of the flexibility and the ease of regular set payments, term loans are the most popular type for small businesses. A word of caution though, if you have bad credit, you may be required to put up collateral to receive the loan. If you don’t meet your responsibilities in paying back the loan, you may lose your collateral. Also, be sure to talk with your financial institution about any penalties or fees that might be associated with the loan. Don’t be caught unaware and have to pay unexpected fees.
A medium-term loan is a simple interest business loan with a low rate and flexible terms ranging from one to five years, with no prepayment penalties. No collateral is required for a medium-term loan, but a personal guarantee is needed.
What is a medium-term loan?
Some business needs demand financing with a longer term. Maybe you’re looking to remodel or expand. Maybe you have an opportunity to buy out a competitor. A medium-term loan will enable you to get the capital you need for your growth project and take up to five years to repay. A medium-term loan offers low rates and flexible terms and often does not require collateral.
How can I get a medium-term loan?
BitX Funding has made it faster and easier for small businesses to get a medium-term loan. You can request from $20,000 to $500,000, with repayment terms of one to five years. The rates on a medium-term loan are based in part on your credit rate, so be sure you have a strong credit history to present. A medium-term loan is repaid through fixed weekly, bi-weekly or monthly payments which can help you get greater clarity on your cash flow.
How can I use a medium-term loan?
You have a great deal of flexibility in how you use a medium-term loan. If you opt for a shorter term, it can be helpful for working capital, new inventory and general cash flow needs. If you take financing for a full term, it can be used for a wide range of growth and expansion purposes.
Let’s take a look at some advantages and drawbacks of medium-term loans.
Benefits of Medium-Term Loans
Set Monthly Fees — Regular fees can be a great thing for businesses that are trying to budget for fixed costs.
Fixed Interest Rates — Having a set interest rate on a loan helps a business owner to know exactly what that loan is costing them.
Improved Credit Score — Receiving and successfully paying off a term loan will improve an owner’s credit score. As they move forward with their business, they will be more likely to get additional loans.
Many Uses Covered — Term loans can be used for a variety of business purposes and, therefore, can be a business’ best friend.
Drawbacks of Medium-Term Loans
Longer Application Process — Because a term loan is a great resource for business owners, there are a lot of hoops to jump through to get one. The application process can be tedious.
Inflexible — If you don’t have great credit or cash flow, the interest rates and other terms can be less flexible. They may also require collateral.
Penalties — Term loans can also have penalties so be sure to speak with your lender, so you are aware of all your obligations.
As a small business, you may find that term loans like the medium-term loan are a great option when it comes time for expansion. Remember that your credit score will favor heavily in your loan terms. Talk all of your options over with your lender to be sure that you are getting the best deal for you.
Have you ever applied for a medium-term loan? How was the application process? Would you recommend this type of loan over another to other entrepreneurs? Tell us in the comments.
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|BitX Funding start-up financing program connects entrepreneurs and business owners with $25,000 – $150,000+ in unsecured business lines of credit. This program can provide you with funding in as little as 10 days and is typically offered with 0% interest financing for the first 6-18 months.||Designed to help meet short-term needs, such as unexpected events, or to take advantage of a great deal. Typically, most small business owners qualify.||BitX Funding offers true long-term business loans with automatic monthly payments. If you are looking to Fund larger projects that pay back over a longer term with rates as low as 5.49% this option may be right for you?||Business lines of credit allow you to draw funds whenever you need. Funds will be deposited directly into your bank account. Repay via automated weekly debits over six months. Your available balance replenishes as payments clear. Lines of credit can go as high as $100,000 with interest rates averaging around 13%.|
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BitX Funding is the online marketplace for small business owners looking to fund a project. We specialize in connecting small business owners with lenders who will compete for your business. We believe small business owners drive the economy and we are passionate about helping your company reach its full potential.
You can reach a loan specialist by toll-free at 1-800-824-2407, or email at firstname.lastname@example.org or applying online here and we can guide you on which loan is the best fit for your business.