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Business Credit Financing: What To Know About Small Business Term Loans

On average, small business owners need capital to run their businesses but, in many cases, tap into their personal savings or more importantly use their personal credit to finance their projects or needs. This article identifies different aspects of small business term loans which are not reported to personal credit. We also recommend several loan products which small business owners can attain even with minimal business credit.

By Thomas Tramaglini, Managing Director at BRP Onesta About Thomas Tramaglini

Small Businesses Need Working Capital

Regardless of industry, according to the SBA over 50% of all small businesses have borrowed money in the past 5 years. In most cases, small business owners cannot find financing through the SBA or their banks because of the rigorous and sometimes impossible guidelines that banks have for lending to small businesses. Therefore, many small business owners seek working capital from Internet or alternative lenders. These lenders can have various rates and programs for small business owners to take advantage of.

Small Business Owners Should Avoid Loans that Hit Their Personal Credit

On average, small business owners tend to pour their hearts into their small businesses. They also pour their personal funds into their businesses as well. BRP Onesta’s Chief Operating Officer Todd Davis heads the company’s commercial lending division. Todd shares that many small business owners who work with BRP Onesta tend to liquidate their credit cards and personal funds for their small businesses. “Time after time I see small business owners using their personal credit to fund their businesses. Small business owners can use various tactics to move money but, in the end, they tend to have higher utilization and lower credit scores.”

Small Business Term Loans: The Key to Small Business Success

Instead of overworking personal credit, small business owners should consider small business term loans to fund their businesses. Small business loans can reduce reliance on personal credit, improve personal and business cash flow, build business credit, and in many cases avoids personal guarantees which personal credit can attach.

Types of Term Loans

There are several different types of term loans but for the purposes of this article we will separate these loans into short-term loans, mid-term loans, and long-term loans.

Short-Term Business Loans are usually paid back in terms less than 18 months. Terms and interest rates can vary on short-term loans. Invoice factoring, lines of credit, and internet loans are good examples of Short-Term Business Loans.

Mid-Term Business Loans tend to have longer repayment periods, up to 60 months on average. For instance