Whether your business is a local leader of the industry keeping up with modern trends, or you’re continuing your initial 10 year plan of expansion, term loans can be pivotal to your organization’s long term growth.
What is a Business Term Loan
A Business Term Loan (sometimes referred to a small business loan) provides borrows with a sum of cash in exchange for borrowing terms made by the lender. Term loans are accompanied with either a flexible or floating interest rate paid throughout the entirety of the agreement by the borrower. The amount borrowed, combined with the interest over time, contributes to the total cost of the loan. Down payments can traditionally be made to the lender to reduce the total cost of the loan after interest.
Early Prepayment Penalties for Business Term Loans
Some financial institutions issue a prepayment penalty to borrows who pay off their loan in full before the end of the loan term. Fortunately for our members, there is no prepayment penalty for First Commonwealth FCU business loans.
Why use a Business Term Loan over a Line of Credit.
Business Term Loans are often used by organizations to pay for or to fund large scale business purchases. This could include building construction, vehicle and mechanical upgrades, technology and infrastructure modernization, etc. A Term Loan should not be confused or used in lieu of a Line of Credit and vice versa.
A Line of Credit is ideal for the flexible and short term financing needs of a business with low repayment requirements. Due to the varying interest rates and the amount you can borrow at a time, it is important to discuss with your business financial advisor on whether a Business Term Loan or Line of Credit is right for you. If you’re looking to grow your business and need solutions for your business that’s been trusted by businesses across the Lehigh Valley and beyond, reach out to myself or any of my colleagues at 610.997.6381 or visit our Business First page.
By Adel F. Mikhael - Vice President, Business Solutions