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Get a fixed-term business loan with predictable monthly payments
Resolve your cash flow issues with a loan, and make repayments over a fixed period of time.
Whether you need new equipment, want to open a new location or just need funds for increasing expenses, the right fixed-term business loan could help boost your business’s cash flow. When you apply for a fixed-term business loan, you enter into an agreement with the lender to make repayments over a fixed period of time. Before applying, you’ll need to make sure you meet the eligibility requirements – which usually include minimum revenue, credit score and time in business requirements.
How does a fixed-term business loan work?
If your application for a fixed-term loan is approved, the lender will disburse the loan amount and you agree to repay the amount over a set period of time. The APR and loan term offered will depend on the amount borrowed, as well as the type of loan, purpose of loan and the lender.
Many fixed-term business loans have repayment periods of up to 10 years. If you’re considering a larger loan amount into the millions, lenders may provide loan options with repayment periods of up to 15 or 25 years.
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Eligibility requirements for a fixed-term business loan
Eligibility requirements vary by lender and the type of loan you’re interested in, but may include:
- Strong personal credit of 650 or higher.
- Business in operation for at least one year.
- Annual revenue of at least $5,000 per month.
- Collateral to back the loan.
How to compare fixed-term business loans
There are several types of business loans available, so it’s important to identify your needs and then compare your options before applying. Here are a few factors to consider:
- Secured vs. unsecured. If you’re applying for a secured fixed-term loan, you will need to declare your assets of value as collateral. In the event that you can’t make repayments, the lender will sell some – or all – of your assets to cover what you owe. An unsecured loan doesn’t require collateral, but the application requirements may be stricter to minimize the lender’s risk – and the interest rate may be higher.
- Loan amount. Different lenders have different lending criteria. Lenders assess your personal and professional profiles, credit history, business type, the purpose of the loan and the value of your assets. You will then be offered a loan amount based on what you can afford to repay.
- Interest rates. Rates can either be fixed or variable (or both) over the fixed-term of your loan. While your repayment amount might fluctuate from month to month, the repayment period remains fixed.
Benefits and drawbacks of fixed-term business loans
- Regularity. You have peace of mind with regularly timed repayments. The amount you pay weekly, bi-weekly or monthly might vary depending on interest rate fluctuations, but the loan term remains unchanged.
- Investment. You’re most likely taking out a business loan to invest in improvements for your business that’ll pay off in the long run.
- Jeopardizing assets. Secured fixed-term business loans require assets as collateral – and the lender can seize your assets if you can’t repay the loan.
- Penalties for early repayment. Settling the outstanding amount before the end of the loan term is a good way to save on interest. However, the lender loses out on that interest – so they may penalize you for ending the fixed-term loan contract early.
Important things to consider with fixed-term loans
- Can you afford it? While a business loan can fix cash flow problems, lenders won’t approve a loan if your business can’t afford to repay it.
- Early repayment policies. Some lenders might charge a penalty fee if you repay the whole loan before the end of the fixed-term. Check lenders’ policies before accepting loan terms.
- Repayment period. If you’re taking out a small loan amount, you can consider repaying it over a shorter period of time. Spreading your repayments over a longer period will chip away at your business’s profits because of interest charges. But if the loan term is too short and the repayments are too high, they could become unmanageable.
Frequently asked questions
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