Exploring Business Loan Terms<\/h2>\n
Amortization:<\/strong> In a business loan setting, this word describes how the borrower (you) will pay off the loan amount. If a business loan is amortized, then the borrower will pay it off in regular, scheduled payments. These payments will be made for the same value and will be paid until both the principal and interest are paid in full.<\/p>\n ARP:<\/strong> Also known as Annual Percentage Rate, this is how \u201cexpensive\u201d a loan will be for the borrower.<\/p>\n ARP factors \u00a0in fees and compounding interest to take into account how much a business loan will truely cost year after year, thus capturing an accurate \u00a0total amount of money being borrowed.<\/p>\n Pro-tip: when looking at business financing, ARP is a better rate to look at than just the interest rate alone.<\/em><\/p>\n Blanket lien:<\/strong> In the context of a business loan, a blanket lien \u00a0means you\u2019re agreeing to give your lender the ability to seize just about all forms of your business\u2019s property should you become unable to pay off your debt.<\/p>\n Collateral:<\/strong> In order to secure a loan, you\u2019ll need to have collateral. This simply means that you provide something of value such as real estate, vehicles, or financial accounts a lender in case you\u2019re unable to pay off your debt.<\/p>\n Pro-tip: when you\u2019re able to provide a lender collateral, you\u2019ll likely \u00a0qualify for funding and also possibly secure a business loan with favorable terms. LendingArch<\/a> is here to help you find the best business loan for your needs and your financial situation.<\/em><\/p>\n Factoring:<\/strong> This is a type of business financing where a business owner \u00a0will sell their outstanding customer invoices to lenders for 50-80% of their value. Factoring is an easy way for borrowers to get cash fast. The only downside is that it\u2019s more expensive than other financing options.<\/p>\n If you do proceed with factoring, you probably won\u2019t get a say in how the lender collects on those invoices. Meaning it could damage any customer relationships that you have established.<\/p>\n Factor rate:<\/strong> This goes hand-in-hand with short-term financing. Unlike ARP, factor rates are decimals (ARP is a percentage) used to multiply against principal debt. The end number is what you\u2019re paying off.<\/p>\n For example, a cash advance of $10,000 at a factor rate of 1.28 means you\u2019ll be paying $12,800 back.<\/p>\n Five C\u2019s of credit:<\/strong> Lenders look at these five things when they are considering lending to you:<\/p>\n Character, capacity<\/a>, capital, conditions, and collateral.<\/p>\n Fixed interest rate:<\/strong> An interest rate that stays the same throughout the entire lifetime of a loan.<\/p>\n Pro-tip: variable interest rate is another type of rate that you may see. The difference between a fixed rate and variable rate is that the latter will increase in increments over the life of a loan. This means with variable interest rate, you\u2019ll end up paying more.<\/em><\/p>\n Grace period:<\/strong> A lender\u2019s pre-determined length of time following a payment due date where you can still make your payment without getting a late fee or other negative effect on your credit.<\/p>\n Pro-tip: Lender\u2019s grace periods<\/a> typically vary. It\u2019s important to make sure you know the correct length of your grace periods for your business loans.<\/em><\/p>\n Line of credit:<\/strong> This is a combination between how a loan and a credit card works. A line of credit will allow you to borrow money from a lender whenever you might need it. The lender will set a cap on the amount you can borrow and the amount of time that \u00a0you\u2019ll have to pay it off. Typically, a line of credit will come with either a monthly or yearly fee. Other terms and conditions will apply depending upon the lender.<\/p>\n Loan-to-value ratio:<\/strong> Also known as a LTV ratio, a lender will consider this when you apply for a loan with them.<\/p>\n For example, if you\u2019re looking to get a business loan for a new retail space, the LTV will determine how much of the space \u00a0the business loan will cover. ,<\/p>\n Merchant Cash Advance:<\/strong> This short-term financing option allows a borrower to \u00a0receive cash immediately in exchange for repayment through future credit card sales. Different from a traditional loan, a merchant cash advance allows lenders to collect directly from your merchant processing sales. They do have higher interest rates and are therefore \u00a0more expensive in the long run. Conversely, a merchant cash advance is typically very easy to get approved for.<\/p>\n Prepayment Penalty:<\/strong> Also referred to as neutrally, sometimes lenders will charge you a hefty fee for paying off your loan early. While you might not think you\u2019ll be in a position to worry about this, we recommend that you consider it before signing on the dotted line. Consider whether a business loan that has a prepayment penalty in the terms and conditions is a good fit for you financially.<\/p>\n Pro-tip: This is one of the most crucial terms you need to understand when it comes to business loans.<\/em><\/p>\n Principal:<\/strong> This verbiage refers to the original size of your loan. If your business loan is for $50,000 then the principal amount of that loan is $50,000.<\/p>\n Secured:<\/strong> If your loan is secured that means it\u2019s been borrowed \u00a0with a lien on your assets. Basically, if your business loan required collateral then it is considered a secured loan.<\/p>\n Pro-tip: A loan can be unsecured. This means that the debt doesn\u2019t have any collateral attached to it. Oftentimes this loan is more expensive to the borrower as it\u2019s more risky for the lender. \u00a0Usually these are pretty hard to qualify for.<\/em><\/p>\n Subprime borrower:<\/strong> This term refers to a borrower who is higher risk. How is that determined? Typically, someone is less likely to be qualified for a traditional business loan if he\/she has a low credit score.<\/p>\n If you don\u2019t think you\u2019ll qualify for a loan and don\u2019t have a co-borrower, we may be able to help. \u00a0LendingArch specializes in working with people who have little to no credit.<\/p>\n Term:<\/strong> Lenders use \u201cterm\u201d to describe the length of time you\u2019ll take to pay back your loan. Business loan terms can be as short as three months and \u00a0as long as 25 years. It all depends upon your lender and the kind of financing you\u2019ve received. .<\/p>\n Underwriting:<\/strong> During the underwriting process, a lender is accessing the risk they will take should they decide to lend money to you. This process also includes a review of the terms your loan will include, should you qualify.<\/p>\n Working Capital:<\/strong> Working capital is how much money (or capitol) your business currently has minus any debt.<\/p>\n Of course, the above list is just a high-level guide on some of the most common terms you\u2019ll encounter in any business loan. In order to make sure that you have all of the knowledge needed to make a cohesive decision, we encourage you to do your research. Additionally, it may be a good idea \u00a0to ask your other business friends to see if they have experience with business loans and are willing to help you understand the process.<\/p>\n Having said that, now that you\u2019ve read through this guide, you should feel empowered and more educated on the terms you\u2019ll run into when applying for business loans. For additional help, check out other blog about business loans and how they affect your credit score<\/a>. It\u2019s important to know all aspects about business loans before you commit to one.<\/p>\n Oftentimes an online personal loan can provide the best alternative for Canadian business owners. That\u2019s where we come in. We \u201cmatch\u201d Canadians to loans and lenders who will most likely make a great match.<\/p>\n This helps to reduce the stress of applying to multiple lenders for borrowers. It also makes sure that your credit doesn\u2019t take multiple hits.<\/p>\n Utilizing our platform means that you can compare small business loans in seconds, with no collateral required.<\/p>\n We also offer an easy online loan application process, flexible repayment schedule, and fast funding directly to your account. Get started today. Contact the LendingArch team to help get you started on your small business loan<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"APPLY FOR A BUSINESS LOAN<\/a><\/h3>\n
Business Loan Terms 101<\/h2>\n
LendingArch and Business Loans<\/h2>\n
![\"businessmen](\"https:\/\/lh5.googleusercontent.com\/g05TvcFYLF023lmDnY5eV_oAl3rPKcFC-ucL0hKb_bPxKhA1cedJSAtG4RmscHjU7MTYLQxljfLKQQ1akEoPlUZlajvNGWZlq8yM-K4rHIZ-Ht18xtVTSUMWpCIJTn3hpFehjdYc\" "\\"business")