Eeenie Meenie Minie Mo: Loan Terms
What kind of loan do you need? It’s a more detailed process than picking one from a hat. Here are common business loans defined:
Term loans. Used for working capital, expansion, refinancing, and acquisitions, you’ll repay them monthly over a term, based on the expected lifespan of the assets you’re purchasing. This is the most common loan used for larger amounts.
Short term loans. These are almost always set up for a term of one year or less, then repaid in a lump sum. Usually for smaller amounts, these loans are best for seasonal inventory buildup or small investments with quick returns.
Lines of credit. Set up to ensure against cash flow problems, lines of credit are designed for temporary cash shortfalls, allowing you to borrow as you need it, up to a certain amount per year.
Equipment financing. These loans are usually easier to secure than general lines of credit because the equipment purchased also serves as the collateral for the loan.
