What Are the Different Types of Term Loans?

When you are looking for a loan, it is important to understand the different types of term loans that are available. As you may know, small business owners aren’t always well-qualified for business loans, especially those without a track record of paying their bills on time.

To qualify for a business loan, it’s important to have the proper business credentials, such as a good credit history, sound financial standing and satisfactory business plans. At Fiscus Capital Funding, we offer a variety of business term loans to meet our client’s needs. In this blog post, we will discuss the different types of term loans and how they can benefit your business. Keep reading, and reach out to us today to get a quote!

Short-Term Loan

Short-term loans are frequently much easier to obtain than traditional loans, and they typically have more flexible repayment terms. Short-term loans are typically provided to meet immediate working capital needs, such as payroll or cash flow problems. However, short-term loans are often much harder to repay and carry higher interest rates than longer-term loans.

A personal guarantee (an individual’s legal promise to repay credit issued to a business for which they serve as an executive or partner) or lien (the right to keep possession of property belonging to another person until a debt owed by that person is discharged) may also be required by a lender. At Fiscus Capital Funding, we offer short-term loans with terms ranging from six months to two years. We understand that your business may have different financing needs at different times, and we are here to help!

Medium-Term Loan

A medium-term loan is a loan that has a repayment term of three to five years. Medium-term loans are typically used for equipment purchases or renovation projects. However, medium-term loans tend to carry lower interest rates than short-term loans and they usually have longer repayment terms.

Interest rates for medium-term loans can range from 5% to 25%, or slightly higher. The maximum length of a small-business loan depends on several factors, including the borrower’s credit history and the applicant’s financial position. At Fiscus Capital Funding, we offer competitive interest rates and flexible terms on our medium-term loans. We will work with you to tailor a loan that meets your specific needs, with flexible loan terms.

Remember that an advertised interest rate in monthly payments or otherwise differs from your loan’s annual percentage rate (APR) when selecting a term loan. How are they different?

  • Interest rate refers to the annual cost of a loan to a borrower and is expressed as a percentage.
  • APR represents the total annual cost of a loan to the borrower, including all fees. The APR is expressed as a percentage, just like an interest rate. It does, however, differ from an interest rate in that it also includes additional costs or fees such as mortgage insurance, the majority of closing costs, discount points, and loan origination fees.

 

APR Formula

  • APR = [(Fees + Interest / Principal / n) x 365] x 100
  • Fees: Administrative fees, including origination fees, closing costs, etc.
  • Interest: The total interest paid over the term of the loan
  • Principal: The amount of the loan without interest and fees
  • Term, n: Number of days in the full loan repayment term

 

Why the difference?

The APR is meant to provide you with more details about what you’re actually paying. The Federal Truth in Lending Act requires that every consumer loan agreement disclose the APR. Borrowers can use the APR as a good starting point for comparing various loan costs because all lenders are required to adhere to the same rules in order to ensure the accuracy of the APR.

Long-Term Loan

A long-term loan is a loan that has a repayment term of five years or more. Long-term loans are typically used for real estate purchases or major expansion projects. At Fiscus Capital Funding, we offer long-term loans with terms up to 20 years. We understand that long-term projects can be costly, and we are here to help you get the financing you need. Business loans and credit lines are typically not eligible for a business tax deduction. However, some lenders will allow borrowers to deduct a portion of their business loan interest on their federal income taxes.

How to Apply for a Term Loan

Now that you know more about the different types of term loans, you may be wondering how to apply for a loan. The application process is simple and can be done online or over the phone. Once we receive your application, one of our loan officers will reach out to you to discuss your options. We understand that every business is unique, and we will work with you to find the best loan for your needs. If you are interested in applying for a term loan, we encourage you to contact us at Fiscus Capital Funding today. We would be happy to answer any questions you have and provide you with the right information to get you started.

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