As you look for business funding you may come across various options for a term loan. Simply put a term loan is a sum of capital that is borrowed and is paid back over time with interest.
The length of the loan term can differ depending on the financial institution you approach. The length of the loan and the interest rate can have a large impact on the total amount you pay back, so it’s important to shop around and make sure it’s right for your business needs. While lower repayments over longer-term loans might seem enticing, they may cost you more in the long run so it’s worth doing a thorough comparison.
Does the term length really have such a big impact?
Doing your due diligence is important. It helps to ensure that you can afford the loan repayments, but will also provide clarity over the total cost of the loan over time. Shorter-term loans might require higher monthly repayments but could save you a significant amount in interest costs when compared to a 36 or 48-month loan term. Some business lenders like Lulalend even allow for early settlement without any penalty fees – offering you another opportunity to save money.
Below is a basic example of how the term of the loan can impact the repayments and total cost, and what you need to be mindful of.
The differences between short-term vs. long-term loans
What questions are important to ask?
Here are some important questions you should be asking yourself when looking for business funding:
- What are the interest rates? This will affect your monthly repayments and the total amount repaid
- What kind of flexibility is there with repayments – is it a monthly repayment or can it be split into bi-weekly payments?
- What type of financing is it – there are various types of financing and they each come with their own advantages and disadvantages.
- Are there additional fees? most financial institutes will ask for admin fees, late payment fees or early settlement fees that are added extras.
Find out how short-term business funding with Lulalend can give you quick, immediate access to funding that is paid back over 6 – 12 months. Our higher approval rates, versus traditional lenders, for SMEs improve your chances of accessing funding that will not require you to provide high-value collateral. With no hidden or early settlement fees, you will also be able to reduce the overall cost of the loan compared to other lenders.