There are several loan options that you might probably consider when you need funds for a business. For most people, online installment loans are an excellent choice because they are not only easy to apply but also have a beneficial repayment structure.
Borrowers can use online installment loans like GoodCheddar for starting a business, covering daily operation expenses, branching out, or investing in other business opportunities. If you want to obtain quick business financing, this type of loan is for you.
Definition of Online Installment Loans
Most people have probably taken out an installment loan in their adult life. Aside from business financing, this type of credit is used to buy a house, purchase a vehicle, pay for college education, and other stuff.
If you’re borrowing a sum of cash with a repayment that you can fulfill in installments over a specified length of time, it’s called an installment loan. The loan’s term can run up to several months or years, depending on the agreement between the lender and the borrower.
Each installment payment goes toward paying a part of the principal (a sum of cash you’ve taken out) and its corresponding interest (an amount imposed by the lender to the borrower for using his/her assets). The borrower may also have to pay for additional fees, such as an origination fee for the application and service expenses.
For instance, you apply for a $20,000 loan with an interest rate of 12 percent and an origination fee of 3 percent. Then, you have to pay this loan in installments along with its interest and additional fees in the course of 4 years.
Since the loan has a 3 percent origination fee, the sum of cash you’ll get from the $20,000 loan will be $19,400. It’s because most lenders deduct the origination fee from the principal loan amount.
A 4-year loan is equal to 48 months of repaying the principal and interest. You need to make a payment amounting to $466 each month to the lender. When the loan’s term expires, your total payment will be $22,400.
Repayment Terms of Installment Loans
To understand the different repayment terms of online installment loans, they are divided into three categories, namely: short-, medium-, and long-term installment loans.
Short-term installment loans can last up to 6 months and 2 years. In most cases, short-term installment loans have what many lenders call a set, one-time fee, instead of interest.
Medium-term installment loans can run in the course of 2 years or 5 years, depending on the contract agreed between the borrower and the lender.
Long-term installment loans have higher loan amounts and longer repayment terms that can last up to 6 or 30 years, depending on the contract agreed between the borrower and the lender.
Short-term loans and medium-term installment loans are great options if your business is just setting off the ground. They come with only a few risks, and you can repay them easily compared to long-term installment loans.
It’s impossible to determine what financial problems would happen in the course of a pretty long year when you take out an installment loan with a longer repayment term. So, better safe than sorry, especially if you’re starting your journey in business.
Specific Purposes of Getting Installment Loans for Business Financing
Owning a business can incur different types of expenses and liabilities that you need funds for. If you need business financing, it’s a good idea to obtain an online installment loan. Here are some of the specific purposes of taking out this type of loan to finance your business.
Fill Up the Inventory
An installment loan can be a great source of funds for the purchase of inventory. For example, if you need to buy inventory in large quantities to save money, you can cover the expenses using this type of loan.
Pay for Day-to-Day Operation Expenses
An online installment loan is a great business loan option to pay for daily business operation expenses, such as rent, payroll, and overhead expenses. Getting an installment loan will help you significantly when you’re short on funds to run your business.
Debt Refinancing
If your business is burdened with a significant amount of debts, you can use an installment loan to refinance your business’s financial liabilities. Ensure that your business has the potential for growth before getting a loan for debt refinancing to ensure that you can repay what you owe in due time while still bringing in profits.
Branch Out or Acquire a New Business
If you think that your business is doing great, you can opt to expand it to reach more potential customers. You can also purchase a new business for more profits. To achieve these goals, you can borrow money from an online installment lender for that purpose.
Takeaway
Installment loans are excellent alternatives when you need business financing. This type of loan has business-specific purposes, such as purchasing inventory, paying for operational expenses, refinancing debts, branching out, and acquiring new business.