Term Loan

A term loan means for a specific amount that has a specified repayment schedule and either a fixed or floating rate of interest. A term loan is appropriate for small business with sound financial statements.

Term loan is usually for equipment or working capital. Often, a small business uses the cash from a term loan to purchase fixed assets, such as equipment or a new building for its production process for procuring raw material. Some businesses borrow the cash they need to operate from month to month.

Short term / Working Capital Loan

Short term loans usually offered to firms that don’t qualify for a line of credit, generally runs less than a year, though it can also refer to a loan of up to 18 months or so. Generally, runs more than one but less than three years and is paid in monthly installments from a company’s cash flow.

Long term / Machinery Loan

Long term loans are paid for the period of three to 25 years, uses company assets as collateral, and requires monthly or quarterly payments from profits or cash flow. The loan limits other financial commitments the company may take on, including other debts, dividends, or principals’ salaries and can require an amount of profit set aside for loan repayment.

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