Business loans are offered with a number of alternative repayment options.
Probably the two most important elements to consider are:
1. interest rate .
Your rate is determined by the risk we assess to such factors as: cash down-payment and reserves, owners equity, cash-flow, past credit history and value of assets pledged as collateral. There is no maximum interest rate or cap.
2.time over which the loan will be repayed.
time is also play an important role in pay off the Business Loans. It's important to remember that the longer the term of the business loan, the more you will repay in interest charges.
In a similar way to mortgages, interest rates can be set as,
The obvious advantage of a fixed rate business loan is that it helps you budget and manage your cash flow without any unexpected costs.
The disadvantage, unlike a flexible interest rate is that you will not benefit if the interest rate is reduced.
The advantage of a variable interest rate loan is that you save money when the market rate decreases. If the rate goes up however, the interest you pay will increase and the number of repayments you make is likely to increase.
You will also find there are different types of repayment methods you can choose from. You can pay regular payments which pays some of the interest and the rest goes against the sum borrowed.
You could opt for regular payments with a final balloon payment which helps to keep the repayments lower whilst keeping cash available for other purposes. At the end of the loan period you would then pay the remaineder of the debt as a lump sum. You could choose to pay interest only payments with a final balloon payment.
Again this keeps the repayments low but you have to find the entire value of the business loan at the end of the loan period. Another option is single payment loan and interest at an agreed date with the lender. This has the advantage of a cash injection with no further outgoings until the agreed repayment date.
The lender may define a variety of circumstances that constitute a default on the loan, including non repayment on time, bankruptcy, insolvency and breaches of any obligations in the loan documents. Try to negotiate advance written notice of any alleged default, with a reasonable period of time to cure the default.