Understanding Term Loans: A Beginner’s Guide

Understanding Term Loans: A Beginner’s Guide

The objective of gaining opportunities and growth can only be accomplished if you invest in your business. Unfortunately, you might not have enough cash on hand to make these necessary investments. In this case, a small business financing option is exactly what you need. While you research the available financing options, you are likely to come across term loans. So what are term loans?

A term loan provides borrowers, or in this case, SMEs, with an agreed amount of cash upfront in accordance with specific borrowing requirements and terms. Term loans, better known as term financing, allow SMEs to repay funds in monthly instalments. With Funding Societies Singapore, you can apply for working capital between S$50,000 and S$2 million. With Funding Societies, entrepreneurs can apply for working capital in a hassle-free manner by providing a unique opportunity to secure funding ranging from S$50,000 to S$2 million.

The three classifications of Term Financing

Depending on your business needs, you might require a specific type of term financing. Read on to identify which of the three classifications is best suited to your business needs. 

Short-term loans

Generally, short-term loans are suitable for day-to-day expenses, and while gaining the funds for this loan is easier to apply for, be sure to expect high rates.  Short-term loans have a shorter repayment period, which might span 1 to 2 years.1 

Intermediate-term loans

Intermediate loans would be described as the ‘sweet spot’. Companies with this kind of financing requirements can expect to hire new employees or expand operations to generate more revenue. Repayments are typically 2 to 5 years, and you can obtain typically up to S$500,000 funding.

Long-term loans

Long-term loans are typically recommended for large enterprises. The requirements for this financing option would depend on the business’ financial record and credit standing. Businesses can access up to millions of dollars in funds, while repayment can be up to 25 years.

Benefits of Term Loans

Free up your cash flow2

A business can use a term loan to finance significant capital investments, freeing up cash flow for other purposes. For example, a term loan can be used to cover the costs associated with hiring and training new employees, thereby allowing the company to use their available funds for other expenses until the new hires become profitable contributors to the company’s revenue.

Fast approvals

If you need fast cash fast injection of funds, term loans are the way to go. Depending on the type of financing you require for your business, SMEs can receive funds from Funding Societies within 24 to 48 hours of receiving the signed contract.

Preserves equity

Term loans do not impact the shareholder equity of a company, allowing it to remain intact. Furthermore, unlike equity financing, the borrower does not have to give up any level of ownership over their business operations, providing business owners with greater autonomy.

Required documents

If Funding Societies piques your interest in Term Loans, the following documents are required for a preliminary loan assessment for our Term Loans:

  • 2 years financial statements
  • Latest 6 months bank statements
  • Director(s) and Shareholder(s) NRIC or Passport
  • 2 year NOA
  • CBS report

What to consider before committing to term loans?

Be aware of the upfront fees before committing to ensure there are no additional fees. Depending on which lender you decide to go with, additional charges might be something to watch out for. Furthermore, your current credit score also plays a part in approval. Consider rebuilding your credit score before applying.

In conclusion, term loans can be an effective financing option for SMEs looking to invest in their business growth. However, it is important to carefully evaluate your business needs, financial situation, and the terms and conditions of the loan before committing. As with any financial decision, it is important to weigh the benefits and potential drawbacks of term loans to determine if it’s the right choice for your business. Visit our website to learn more!

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Disclaimer: The information provided to you in this blog post is intended only for general information purposes only and does not constitute legal or other professional advice on any subject matter. The materials and the information provided are not intended to be and do not constitute an advertisement or solicitation. In no event will Funding Societies be liable to any party for any direct, indirect, incidental, special, consequential or punitive damages for use of such information by you or any unauthorised third party. 

Funding Societies’ Business Term Loans are fulfilled by FS Capital Pte Ltd.

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