Are you looking for cash funding to grow or maintain your business? When business owners think about financing from a bank, they’re usually thinking about procuring a “short term loan.” A term loan offers a business owner a cash payment that is to be paid back in installments over a specified period of time. For the duration of the loan, the amount owed will accrue interest — which will also need to be paid. Banks and other financial institutions generally offer term loans to businesses that are completing expansion or development and need capital assets.
There are three major aspects of a term loan:
The amount of money that is borrowed will need to be paid back over the term of the loan: for instance, $10,000 over the course of 5 years. The interest rate is the amount of interest that must be paid alongside the loan principal amount — a 5% Annual Percentage Rate (APR) on a $10,000 loan will accrue $500 in interest over a year. For most term loans, the borrower will immediately receive the amount of money that is borrowed. They will then need to begin their monthly installment payments the following month (or a later date, if otherwise specified). A term loan is generally considered to be a secured loan; it is secured with business assets and occasionally personal assets.
Business owners will also need to have their financial documents and business credit in order to apply for a term loan with a reputable financial institution. The accountants at Hogg, Shain & Scheck can help your business navigate all the requirements of applying for term loans.
Still not certain whether a term loan is the right solution for you? There are many options for business funding, ranging from business loans to equity lines of credit — which is best for you will depend on your company’s current financial situation and needs.
Contact Hogg, Shain & Scheck today to find out more about your company’s borrowing options. HSS offers full accounting services for organizations throughout Toronto and Ontario.