Resolve your business’s cash flow problems while you repay over a fixed period.
When your business experiences a cash flow dip, you can choose between several loan options to resolve it. Whether you need new equipment, help filling an order or help from a third party to pay suppliers, the right fixed-term business loan can help boost your business’s capacity and increase turnover.
When you apply for a fixed-term business loan, you enter into an agreement with the lender to make repayments over a fixed period of time. Lenders consider your business profile, the loan amount and what you can afford. If approved, you can have money in your account within one day of submitting your application.
Business lenders you can compare
How does a fixed-term business loan work?
If your application for a fixed-term loan is approved, the lender provides you with the loan amount and you agree to repay the amount over a fixed term.
The terms offered depend on the purpose of the loan and the type of lender. Online and alternative lenders approve small business loans with short repayment periods, usually between three months and five years.
If you’re considering a more substantial loan for purchasing property, a vehicle fleet or heavy machinery, traditional banks provide loan options with repayment periods of up to 15 years or longer.
How to compare fixed-term business loans
There are several products available from both traditional and alternative lenders, so it’s a good idea to compare options before applying. Here are a few factors to consider:
- Secured vs unsecured. If you’re applying for a secured fixed-term loan, you will need to declare your assets of value as collateral. In the event that you can’t make repayments, the lender will sell some or all of your assets to cover what you owe. An unsecured loan doesn’t require collateral, but the loan terms may be strict to minimise the lender’s risk.
- Lending amount. Different lenders have different lending criteria. Lenders assess your personal and professional profiles, credit history, business type, the purpose of the loan and the value of your assets. You will then be offered loan terms based on what you can afford to repay.
- Interest rates. Rates can either be fixed or variable (or both) over the fixed term of your loan. While your repayment amount might fluctuate, the term remains fixed. Some loan products feature an introductory fixed rate for a certain period, after which it reverts to the standard variable rate for the rest of the loan term.
Have you weighed up the benefits and drawbacks of a fixed-term loan for your business?
Here are some of the positive and negative aspects of fixed-term business loans.
- Regularity. You have peace of mind with regularly timed repayments. The amount itself might vary depending on interest rate fluctuations, but the term remains unchanged.
- Investment. Every repayment represents an investment in your purchase. You are also increasing your assets portfolio, growing your business and becoming a more financially responsible business owner.
- Hard pull credit checks. Applications for fixed-term business loans lead to hard pull credit checks. These checks negatively impact your credit score, so make sure you’re eligible before submitting an application.
- Jeopardising assets. Secured fixed-term business loans require assets as collateral. The lender can seize your assets if you can’t repay the loan.
- Penalties for early repayment. Settling the outstanding amount before the end of the loan period is a good way to save on interest. However, the lender loses out on that interest, so you will likely be penalised for ending the fixed-term loan contract.
Things to avoid with fixed-term business loans
Consider the following factors when applying for a fixed-term business loan.
- Can you afford it? While a business loan is meant to fix cash flow problems, lenders won’t approve a loan if your business can’t afford to repay it. Lenders conduct credit checks that reflect on your credit report; the more hard pull credit enquiries, the weaker your overall credit score.
- Check early repayment policies. Some lenders might levy a penalty fee if you repay the whole loan before the end of the fixed term. Check lenders’ policies before accepting loan terms.
- Consider the repayment period. If you’re taking out a small loan amount you can consider repaying it over a shorter period. Spreading your repayments over a longer period will chip away at your business’s profits, but if the loan term is too short and the repayments are too high they could become unmanageable.
Have more questions about fixed-term business loans?
Who is eligible for this loan type?
Lending criteria vary depending on the lender, but factors such as time in the industry, assets, credit score and the loan amount are key in the lender’s decision.
Which lenders offer fixed-term business loans?
Currently there are several online and alternative lenders offering fixed-term business loans, including those on the page above. The fixed term can be between three months and five years. Traditional banks often have a large portfolio of business loan products for larger amounts, although lending criteria might not be as flexible as their online counterparts.
Can I get an unsecured fixed-term loan?
Yes. However, while an unsecured fixed-term loan requires no assets, lending criteria and loan terms are less flexible. These are usually ideal for small business loans with shorter repayment periods.
What happens if I can’t repay?
You have to let the lender know immediately if you can’t make a repayment or repay your loan. Most lenders propose solutions like postponing or reducing payments. If you have a secured loan where assets have been put up as collateral, the lender will sell your assets to cover the outstanding amount.