When it comes to obtaining working capital, chances are the No. 1 thing on your mind will be exactly how much money you can acquire. However, the money borrowed is only one small piece of the business loan puzzle.
Chief among the other factors to focus on is how the money will be repaid.
Repayment options affect all aspects of a loan
When you take out a small business loan, you’re entering into an agreement to repay the funds borrowed. How this repayment process is structured can significantly impact your financial situation and mean the difference between a streamlined arrangement and a burdensome debt obligation.
Factors to consider when it comes to repayment include term length, payment amount and interest.
Term lengths determine how long you have to repay your loan. The longer the repayment period, the smaller each payment will likely be. However, longer repayment periods also mean more time for interest to build on the money you’ve borrowed. So while you may have smaller, more manageable payments, you’ll also end up paying more money over a longer period of time.
The amount of your monthly payments, which will generally be influenced by term length, is important to keep in mind. Monthly payments that are too large to manage will leave you with depleted cash reserves and a taxing debt obligation hanging over your head. In the worst case scenario, you may simply not be able to keep up with the payments, leading to a default on the loan and potential loss of your business.
Finally, remember the role interest plays in repayment. The higher the interest you’re being charged, the faster you’ll want to pay off your loan. More interest means more money spent, and even smaller loans can end up costing a fortune if the interest charged on them is too high.
Choosing the right loan
It’s for these reasons that you should borrow from a lender who offers flexible repayment options suited to the needs of a small business owner. Banks and other traditional lenders have only become stricter in their qualifying standards and repayment guidelines, but alternatives do exist.
Lenders like National Funding can provide you with a wealth of borrowing options that feature variable payment terms.
Besides flexible repayment terms, National Funding loans also come with minimal paperwork and the opportunity to obtain cash in as few as 24 hours.
In addition to working capital loans, merchant cash advances also provide you with no restrictions on usage and no pre-payment penalties. This means you can eliminate your debt obligations faster without the risk of incurring extra charges.