When starting a new business, it can be challenging to secure funding. In fact, roughly 80 percent of small business loan applications are rejected by banks. Fortunately, online platforms like Lendio help small business owners access the capital they need even when banks turn them away. Rated as one of Forbes’s top lender comparison sites, Lendio partners with over 75 lenders to provide more than 10 small business funding options.
To date, the online marketplace has been instrumental in the disbursement of over 300,000 small business loans amounting to more than $12 billion. It also pays it forward by donating a percentage of every loan to low-income entrepreneurs through the “Lendio Gives” program.
In this guide, you’ll learn about a classic funding option, the business term loan. It’s a product offered through partners in the Lendio network. You’ll also discover how easy the application process is and what you’ll need to get started.
The Classic Business Financing Option
What is a Business Term Loan?
A business term loan is a flexible funding source that helps you level up your business. Plus, you’ll build business credit in the process, assuming you make timely loan payments.
What Are The Typical Terms of a Business Term Loan?
You’ll generally get between one and five years to repay what you borrow. Loan proceeds are disbursed in a lump sum and payable in monthly installments. The amount could vary each month, and it depends on if you get a fixed or variable interest rate.
Fees and Interest
Each lender has its own fee schedule, but your interest rate can be as low as 6 percent. The most competitive interest rates are typically reserved for small business owners with excellent credit. A strong credit score could also help you access a larger loan amount.
Some lenders also consider business credit when deciding on a loan amount and interest rate to offer you.
Lendio’s funding partners offer business term loans between $5,000 and $2,000,000.
What Can You Use Business Term Loan Funds For?
You can use business term loan funds to cover various business expenses. Most business owners use the loan proceeds to cover operating expenses, including payroll, utilities and monthly lease payments, or purchase inventory and equipment.
How to Qualify for a Business Term Loan
Lenders will consider these factors to decide if you’re a good fit for a business term loan:
1. Credit Score
A higher credit score means you’ll likely qualify for the best loan terms and higher funding amounts. If your score is low, you may not get turned down for funding, but you can expect to pay more in interest. Some lenders could also require you to secure the loan with collateral, like your car or home. The downside is if you fall behind on payments, you could lose your asset if the lender seizes it and sells it off to recoup its losses.
Your business credit score could also help determine if you’re approved for funding. However, the lender probably won’t make a decision solely off this score alone.
2. Time in Business
If you’re new to the business world, you could be eligible for a business term loan. But most lenders will want you to have at least six months in business and relevant industry experience.
3. Predictable Annual Income
Beyond your credit rating, your annual income is one of the most important factors of your loan application. And for a good reason – lenders want to know that you can afford the monthly loan payments. It’s equally important to demonstrate that you have responsibly managed debt obligations in the past, as evidenced by a solid credit history.
As mentioned earlier, you may be required to put up collateral to secure your business term loan. This is common for new businesses and could also be the case for a small business owner with a series of past credit missteps.
The Classic Business Financing Option
How to Apply for a Business Term Loan with Lendio
Lendio makes it easy to apply for a business term loan, and it’ll only take 15 minutes of your time. Before you move forward, gather the following information and documents to save yourself a ton of time and headaches during the lending process:
- Personal background information
- A resume and solid business plan
- Credit reports
- Personal and business tax returns
- Signed personal financial statements
- Projected financial statements
- Personal and business bank statements
- The cost or value of possible collateral
- Business licenses and registrations
- Articles of incorporation
- Contracts you have with third parties
- Franchise agreements
- Commercial leases
Once you’re ready to move forward, here’s how to get started:
- Step 1: Apply for funding using Lendio’s 15-minute application. It’s free and won’t impact your credit score.
- Step 2: Review potential matches from the lenders in Lendio’s network.
- Step 3: Select the most suitable funding option and finalize your loan application. Be mindful that you’ll get a hard inquiry on your credit report during this stage.
- Step 4: Get approved and access the funds in your bank account. Some borrowers receive funding in just 24 hours.
If you’re not entirely sold on business term loans, other loan products are worth considering. Lendio also features these financing options to help you secure the working capital you need for your small business:
- SBA Loans
- Business Lines of Credit
- Short-term Loans
- Merchant Cash Advances
- Commercial Mortgage
- Equipment Financing
- Accounts Receivable Financing
- Start-up Business Loans
- Business Acquisition Loans
You can quickly gauge your eligibility for these financing products from a lender in the Lendio network with the simple 15-minute application.