Term loans for small businesses

Term loans are a flexible form of short-term business funding, providing businesses with a lump sum of money upfront. This capital is then repaid over a fixed term, typically ranging from three to five years, with regular scheduled payments. The repayment structure often involves principal and interest payments combined into a single monthly payment, simplifying budgeting and cash flow management.

This straightforward structure makes them particularly appealing to small businesses which often require predictable and manageable financing options. Term loans are commonly used for the purchase of property, refinance and property improvement.

Why are term loans useful for small businesses?

Predictable cash flow

The fixed repayment schedule of a term loan allows for easier financial planning. Businesses can accurately forecast their cash flow needs and allocate resources accordingly. This predictability is especially beneficial for new companies, or those with seasonal fluctuations in revenue as a form of short-term business funding.

Funding for growth initiatives

Term loans are not restricted to specific uses. The capital can be used for various business purposes that support growth, such as purchasing equipment and renovating or expanding a physical space.

Operational flexibility

The flexibility of term loans can be particularly valuable for new businesses where cash flow may be erratic at first. Unexpected expenses or temporary cash flow gaps can disrupt business operations. Term loans provide a buffer, offering readily available funds to cover operational costs like rent or maintenance during periods of slow sales or unforeseen circumstances. This financial safety net allows businesses to navigate temporary setbacks without compromising their core activities.

Types of term loans:

Short-term business loan

Short-term business loans are ideal for immediate, short-term funding needs. They are often used to cover temporary cash flow gaps, manage unexpected expenses, or take advantage of quick business opportunities. Due to their shorter duration, these loans generally come with higher interest rates but provide quick access to necessary funds.

Intermediate term loans

With terms ranging from one to five years, intermediate-term loans offer a balance between short-term needs and long-term financing. They can be used for a variety of purposes, including equipment purchases, working capital, and expansion projects. The repayment schedule is longer than short-term loans, making them more manageable for many small businesses.

Long term loans

Spanning over five years, long-term loans are suited for significant investments such as large property developments. These loans have a fixed term and have fixed payments spread over an extended period, potentially making them more affordable for large projects.

Case study

Our Alternative Term Loans are designed to provide borrowers with the essential time to achieve their objectives. In this situation, a developer required more time to meet planning requirements for their development project in North West London. A 12-month facility was insufficient in this case, and the borrower required and needed planning approval for the property before starting construction work.

As a result, this Term Loan was secured as a first charge across three properties in Northwest London. It provided the borrower with the necessary financial flexibility and addressed their time-based constraints. This bespoke 3-year London term loan not only refinanced the existing loans on the properties but also released funds for refurbishments. You can read more about this case study and others here.

Conclusion

We offer term loans for small businesses looking to support asset management situations or to release working capital. These loans can be secured on a range of residential and commercial property. We offer LTV of up to 70% and up to £4m over 3-5 years. Our Term Loans also have the benefit of having no early repayment charge. The loan is also structured to match cash flow including special arrangements for interest to be accrued when the property income is not yet stabilised. If you would like to enquire further about our Term Loans, please contact us today.