Getting a Loan for Your Business?

Talking Shop: Key Business Lingo for Your Loan

Tell me this, are you ready to jump in and apply for a business loan for your company? Before you dive in, let’s get cosy and chat about some key business terms. I would hate for you to face any surprises down the line.

Are you aware that a massive number of folks just like you jump in and sign loan papers without really understanding the business lingo? I don’t want that for you. So buckle up and read on, as I enlighten you about the common terminologies lenders use when discussing business loans. Trust me, you’ll thank me later.

Understanding “Terms” and Its Importance

Just so you know, business loan terms usually refer to the length of time you’ve got to pay back your loan plus interest to the lender. Loan terms in the business world could be a couple of weeks to as long as 25 years, quite a stretch, isn’t it?

Let’s delve into different types of loans and some essential business loan terms. This should help you to get your ducks in a row when applying for that loan.

Conventional Bank Loans

Ever heard about conventional bank loans? They’re stable, they’re solid, but can be tough to qualify for and frankly, not used by many small business owners. With these loans, you;ve got anywhere between 3 to 10 years to repay the loan. Yeah, not the fastest horse in the race, especially when compared to SBA loans.

SBA Loans

Next in line, we have Small Business Administration (SBA) loans. They’re the tortoises of the business loan community, offering some of the longest terms out there. The terms for these loans can vary wildly depending on which SBA loan program you choose. Here are some popular ones:

• SBA 7(a) Loan Program going from 5 to 25 years
• SBA Microloan Program typically less than 6 years and
• SBA CDC/504 Loan Program stretching from 10 to 25 years

Medium-Term Business Loans

What about medium-term business loans? They’re middle-of-the-road, covering around 1 to 5 years. While they’re common with alternative lenders, these loans function a lot like conventional bank loans. Why? Because they offer a longer repayment period than most online business credit alternatives.

Invoice Financing

Ever considered invoice financing to fund your cash-flow gaps? It’s a swift short-term solution. The funding is usually secured by outstanding invoices and ranges from 3 to 6 months. How long it takes is often influenced by the amount of time your customers take to pay their invoices.

Short-Term Business Loans

When it comes to short-term business loans, the lifespan could range anywhere from 3 to 18 months. They may offer a lower cost of capital along with smaller amounts than others. The downside? You’ll need to repay it in a shorter span.

Business Lines of Credit

Depending on the way the wind blows, business lines of credit can be short or medium-term. These guys are a mixed bag with lifespan varying between 6 months to 5 years.

Equipment Financing

Looking to buy some new equipment? Specific equipment financing can come to your rescue. Thanks to its built-in collateral – yep, you guessed it, the equipment you buy – lenders take less risk. These loans typically have longer terms spanning between 2 to 5 years.

Merchant Cash Advance

You might want to sit down for this. Merchant Cash Advances have no set terms. Instead, repayment is through a daily percentage of your business card revenues. The payments tend to fluctuate daily, making it difficult to determine the term, though they tend to have the swiftest repayment period of just about 4 to 18 months.

Talking About Business Loan Terminology

You are going to come across a host of terminologies during your loan hustling process. Let me take you through them quickly:

– Cash Flow Statement: Keeps track of cash coming in and out during a specified period.
– Grace Period: Extra time given after a loan payment due date without attracting late fees.
– Entity Type: Refers to the legal categorization of your business.
– Collateral: Property owned by an individual or business that’s used to secure the loan.
– Unsecured: Refers to loans sans collateral backing.
– Underwriting: This is the process through which lenders determine your creditworthiness.
– Accounts Payable and Receivable: Short-term debts to be cleared (payable) and reimbursements you’re owed (receivable).
– Amortization: A term in business finance referring to the process of repaying loans in equal, scheduled payments.
– Consolidation: Your action of paying off multiple loans through a single loan.
– Debt Financing: A means of business financing or a loan option that requires repayment of principal amount plus interest.
– Loan Agreement: A contract signed when you agree to take the loan.
– Maturity: The point at which the loan is paid off in full.
– Subprime Borrower: A borrower considered high-risk
– Blanket Lien: A condition that gives the lender the right to seize any of your business assets if the debt isn’t paid.
– Variable Interest Rate: Interest rate that changes with market rates during the loan tenure.
– Refinancing: Replacing existing loan with a new one.
– Working Capital: Funds used in daily business operations.

That was a mouthful, wasn’t it? You now know all the ins and outs of the lingo you need for your loan process.

The Business Road Well Travelled

Hiring experts like Lawscape and the Lawscape is the smart choice if you’re trying to work out or modify your SBA loan with lenders. We’ve already walked this path, and navigated others just like you through these business terminologies.

We’ll help you understand the most critical details of your business loan, making your business journey smoother. Considering our track record of helping our clients avoid bankruptcy and home foreclosure, we’re the guiding hands you need through your business loan complexities.

So reach out, let’s walk this journey together.