Tuesday, 25th January 2022 | Management
What is a term loan and how is it beneficial to businesses?
Term loans are an easy and efficient way for businesses to raise money for various requirements from inventory management to expansion. iCapital is here to help your business with easy funding options!
What is a term loan?
Banks and lenders' most frequently-issued business loan is a term loan. These loans allow you to borrow a large quantity of money and repay it over a certain period of time with consistent installments. As a result, term loans are one of the most popular methods of borrowing money for small and medium-sized enterprises in Canada, compared to other business loans.
When to consider a term loan
When you’ve been in business for over a year and it’s taking off, you have a lot of possibilities. So, how do you know if a term loan, rather than, for instance, a revolving line of credit, is the best option for your company?
A term loan is an excellent option for a short-term project or cost in general. A term loan, for example, might assist you in purchasing merchandise or investing in a marketing campaign.
Business term loans are great for well-established enterprises with a track record of financial stability. Finally, term loans are appropriate for companies that don't want funds right away. Applying for a term loan takes time, especially if you're going to take advantage of low-interest rates. So, if you need money quickly, a term loan might not be the greatest option.
How is a term loan beneficial to businesses?
Additional income potential
Term loans can be used to support critical fixed assets or equipment. These assets can create revenue, which can be used to pay off the loan.
Low monthly down payments
A term loan with low monthly payments allows you to purchase additional assets without depleting your cash flow.
Less strict credit requirements
You don't need perfect personal or business credit to qualify. However, to be eligible for a term loan, you need to have a credit score of roughly 650. On the other hand, higher credit scores will result in better loan rates and terms.
Added cash flow
When suppliers of fixed assets cannot grant credit, a term loan might assist a company in development. As a result, your company won't have to wait for cash reserves to fund asset acquisitions.
When employed properly, this form of leverage may increase your company's profits. In addition, the leverage factor can help you acquire additional assets if you buy assets that provide economic value.
Ability to maintain ownership
Businesses can raise a large sum of money without sacrificing equity. Venture capital firms that invest vast quantities of money, on the other hand, will need a portion of a company's stock. When you lose stock, you lose some control over your company.
When to choose a business term loan?
Small firms can borrow more money with business term loans than merchant advances since term loans offer a more predictable repayment structure than fixed-rate loans. Term loans are ideal for meeting all of your business's requirements, including:
- Purchasing inventory
- Remodeling your retail location
- Opening another retail location
- Purchasing equipment
- Paying rent or other real estate payments
- Obtaining funds for accounts payable
- Managing your business cash flow
Consider iCapital term loans for your small business!
Hopefully, this post has clarified term loans for you. iCapital's business term loans are an excellent way to develop your company going forward. If you're looking for a term loan, iCapital can help you get approved. Start by determining the amount of money available for your company. Then, contact us at 1.877.251.7171 for guidance and planning for your small business term loans in Canada.
Is a business loan taxable income?
Are business loan payments tax deductible?
How small business loans in Canada affect taxes
Typical business expenses you can deduct
- Home office
- Commercial rent
- Employee salaries
Typical business expenses you can't deduct
- Expensive gifts to clients
- Commuting expenses
- Entertaining clients
- Contributions to political agendas
Why work with iCapital?
Small business financing Canada ,Management
Best strategies to pay off your small business loan
Best Strategies To Pay Off Your Small Business Loans
Knowing that your company's debt is mounting can be a powerful drive to take action, but it can also feel intimidating and overwhelming. Developing a debt reduction strategy can assist business owners in regaining control of the situation and paying off debt as quickly as possible.
The following company debt management techniques can teach you how to pay off debt quickly.
Pay in Installments
You may utilize extra money to pay off your debt faster than paying your small business loan equated to a monthly installment (EMI) once a month. Of course, the lender will charge you a fee for this, but it will undoubtedly speed up your debt repayment.
Please keep in mind that this is typically only an option for secured loans. If you have an unsecured company loan, talk to your lender about the terms for making partial payments.
At Regular Intervals, Increase Your EMI Percentage
If you think you'll be able to manage your debt by reducing your spending or raising your income, talk to your lender about increasing your EMI payment by a particular percentage. The viability of this option will, once again, be determined by your lender's policies and the sort of company loan you have obtained. By increasing your EMI percentage, you’ll be able to repay the company loan faster.
Create a Positive Working Relationship with the Lender
It is the most underrated aspect of the banking sector: borrowers frequently overlook the importance of developing a positive working relationship with the lender.
To build a positive working relationship with your lender, you must pay all EMIs on time and communicate with them regularly. It increases your trustworthiness and improves your chances of acquiring favorable loan conditions. In addition, the lender can assist you in taking advantage of various discounts that may be available from time to time.
Borrowing with Caution
Don't overborrow since it can affect your repayment schedule. If your loan is not properly handled or you fail on your payments, it can have long-term consequences.
As a result, it's critical to borrow an amount that you can readily return without jeopardizing your company's cash flow. Also, avoid unnecessarily increasing running costs during repayments since this might negatively influence your payback ability. Make the most of your resources and attempt to repay your company loan as soon as possible.
Decrease Company Spending
You can put more money toward your debt repayments by reducing any company expenditures that you can do without. Make a list of your monthly spending to see what costs might be reduced or eliminated.
Reduce inventory to increase cash flow or halt charity giving until the company's debt is paid off. The money you save in unnecessary costs can be put toward debt payments to guarantee that the money owed is paid quickly. It may surprise you how reducing small monthly expenses can add up to significant savings.
Find Ways To Increase Revenue And Income
Maximizing cash flow is a significant aspect of paying down corporate debt. Finding new ways to create money and reduce your debt will help you get out of debt faster. It’s a good idea to identify the accounts with the most significant debt. You'll require cash inflow to pay them down.
Consider the various ways you and your firm could improve cash flow. For example, can you diversify your company's services or goods to capitalize on a market gap? Raising or reducing pricing, holding a flash sale, upselling to customers, focusing on your store's most popular goods, or renewing your marketing approach are all actions that could potentially increase company sales.
Get Small Business Loans with iCapital!
iCapital is one of Canada’s leading loan providers to small businesses in various industries. We offer flexible payment options and hassle-free procedures to ensure you get your money as soon as possible. Get more information about iCapital's small business loans. Contact us today and apply for a small business loan for your company with a 98% approval rate and 24/7 access to your accounts.
Small business financing Canada ,Accounting
Do short-term loans affect your credit rating?
What is a Credit Rating?
A credit rating determines how creditworthy individuals, groups, enterprises, non-profit organizations, governments, and even nations are. Special credit rating agencies assess borrowers' financial risk to decide whether or not they will be able to repay short-term loans on time.
A strong credit rating boosts trustworthiness and demonstrates a record of repaying debts on time. In addition, it assists banks and investors in determining whether or not to approve loan applications at a given interest rate.
Why does a Credit Score matter?
Before discussing business financing, let’s talk about credit ratings and why they matter. Most lenders are partial to issuing a company loan based on your credit score. Why? Your credit score and personal financial history will provide information and an accurate picture of your financial responsibility.
Lenders will use your credit score to determine how trustworthy you will be as a borrower.
This is especially true if you are a young entrepreneur. If you have no company credit, a lender can look at your previous ability to pay off past loans to determine your creditworthiness.
How does a credit check affect a Credit Score?
While you may have been aware that personal credit ratings influence your ability to obtain company funding, did you realize that qualifying for a business loan might negatively impact your credit score? This "blow" will affect your ability to obtain the best rates.
The type of credit score performed by the lender determines the influence on your credit score:
- Some credit inquiries from lenders consider variables other than your credit score with a no credit check. This implies that your credit score will not suffer.
- During the pre-approval procedure, a soft credit inquiry will be performed, which will not affect your credit score.
- A hard credit inquiry is the ultimate sort of credit inquiry and occurs just before a company loan is approved. Each inquiry will lower your credit score by 1 to 5 points.
Situations when business loans affect Credit
There are various types of business loans, each with its own impact on personal credit. For example, most business loans will harm your credit if you guarantee a company account.
It is a frequent circumstance for solo owners and couples. The lender has the authority to recover payments from you if the firm defaults. In addition, the lender will record defaulted business debts on your credit reports.
Another situation where business loans may impact your credit score is when you utilize personal borrowing to support your company. For example, if you utilize personal loans to finance your business, such as home equity loans, the payments will appear on your credit reports.
A company line of credit is no different. If you guarantee the line of credit, it may impact your credit. Your credit ratings may be affected in either a good or bad way. If your company has difficulty repaying debt, it will have a negative impact on your credit score.
How Can You Improve Credit Score?
Being authorized for a fair business loan with little to no credit is certainly not impossible. However, if you want a loan with a longer payback period, and cheaper fees and interest rates, raising your credit score can help you get approved.
- Find out what's causing your credit score to suffer
- Create a credit history
- Raise your credit score
How Does iCapital Work?
iCapital offers hassle-free loans to small businesses in as quickly as 24 hours. With minimal paperwork and hold-ups, you can have the money transferred to your account within 48 hours.
iCapital is a one-of-a-kind firm in Canada. Are you prepared to begin the process of obtaining short-term loans in Canada? To get started, give the iCapital team a call today at 1 877-251-7171!
Small business financing Canada
April is World Autism Month
April is World Autism Month. It is an annual opportunity to bring awareness to and dedicated conversation about Autism Spectrum Disorder (ASD). ASD is a neurodevelopmental disorder that affects the way people interact and communicate. ASD is a spectrum disorder, which means the degree to which each person on the spectrum experiences certain challenges will be different from one another. In Canada, approximately 1 in 66 children and youth ages 5-17 have been diagnosed with autism.
At iCapital, we believe strongly in being a good corporate citizen and giving back to Canadians. We have a long history of charitable giving including sponsoring sports teams and children’s organizations. Prior to the Covid-19 pandemic, we ran an annual fundraising event in support of autism that raised over $100,000 for Integrated Services for Autism and Neurodevelopmental Disorders (ISAND).
ISAND is a registered non-profit organization that serves children and young adults with autism and other neurodevelopmental disorders. ISAND’s integrated team of developmental pediatricians, psychologists, clinicians, and therapists work together with families to achieve the best possible outcomes for young people with autism and neurodevelopmental disorders. iCapital is a proud, long-time supporter of this amazing organization. This year, we donated $10,000 to support ISAND’s various programs.