An online installment loan is probably one of the first types of money loans that come to mind when thinking of funding a business. It’s among the most common and convenient loans that you can avail of today for business financing. You can use this loan to start a business, pay for everyday operational costs, or invest in expansion opportunities.
Although there are other loan options to finance a business, some people choose an online installment loan because it’s no hassle to apply for, and you can also get the cash fast. If you need to obtain online installment loans, you better check this site PersonalMoneyNetwork.com to learn more.
What is an Online Installment Loan?
Installment loans are the money borrowed that can be repaid in regular installments over a specific length of time. How many months or years you have to pay the loan will depend on the agreement between you and the lender. But, typically, installment loans are paid over the course of six months to thirty years.
The payment you make each installment repays a portion of the principal (the original sum of money you’ve borrowed) and the interest (the amount levied by the lender by computing a percentage of the principal balance). Besides the interest, there’s also an origination fee charged by the lender for the costs of application and administration.
Let’s say you take out a 4-year loan amounting to $20,000 with a 12% interest rate and an origination fee of 3%. The 3% origination fee will be subtracted from the principal amount before you get the loan, which means the loan amount you’ll obtain will be $19,400.
Since it’s a 4-year loan, you have to pay the principal and interest for 48 months. Every month you have to make a $466 payment to the lender. At the end of the loan’s term, your complete payment would be a total of $22,400.
Short, Medium, and Long Term Installment Loans
The length of time for the repayment of installment loans vary. Lenders typically define this loan type as short-term, medium-term, and long-term.
- Short-term installment loans have repayment terms of 6 months and 2 years. Generally, short-term installment loans don’t carry interest but a fixed, one-time fee.
- Medium-term installment loans have repayment terms between 2 and 5 years.
- Long-term installment loans carry repayment terms between 6 and 30 years.
If you’re just starting a business and you’re yet to have an excellent business record, you can settle with a short- or medium-term loan. It’s because they’re less risky than longer-term installment loans. You don’t know what will happen to you financially in the span of those long years.
Reasons to Obtain an Installment Loan for Business Financing
An online installment loan is an excellent financing option if you have a business. Here’s a list of reasons you should take out this loan type to finance your business endeavors.
Cover Operational Expenses
If you want to cover operational expenses, such as rent, payroll, and overhead costs, getting an online installment loan is a good idea. Whether you want your business to prepare for a busy season or stay afloat during a sluggish season, it’s a must to have working capital on your side.
Applying for an installment loan will help you big time when you don’t have enough funds to run your business.
Purchase of Inventory
An installment loan can also help your business when there are things that need to be bought. For instance, if you need to buy a vehicle for transporting goods or purchase inventory in large quantities to save on expenses, you can obtain a loan.
Expand Your Business or Acquire a New One
Business growth is an important goal that every business person must prepare for. You should always aim for this goal if you want your business to be successful.
Grab every opportunity to expand your business, especially if it’s doing very well. For example, you can add one or more branches that can cater to many customers.
If there’s a need to acquire a new business, do it. You can merge this new business into your first business to increase your holdings. Always have a mindset for growth and improvement. Never settle for less if you can reach for more. If you want business financing, get a loan to achieve your goal.
Make sure to manage your business finances well to avoid financial problems. If your business has incurred too many debts, you can get a loan for debt refinancing. It’s a smart move if your business is in the stage of growth because you have more chances to repay the new loan while still driving profits into your business.
Installment loans are a great option when you need financing to start your business or keep your existing business operations running smoothly. You can use the loan to buy inventory, cover operational expenses, refinance business debts, etc.