If you’re looking for by-the-book funding, traditional business financing offers a specific funding amount, a fixed term, and a set rate.
Traditional-term business financing has the potential to work for a lot of different business types. It’s for companies that want a specific amount of money at a set rate that they can pay back over a fixed term. If everything goes according to plan, this type of funding shouldn’t offer any surprises. That makes it ideal for well-grounded companies with a solid financial outlook.
While traditional-term business funding is fairly formulaic, there will be variables involved in your specific funding type. Here are the main points:
Traditional-term business financing can be hard to get. Your business will need an above-average credit rating to qualify for this type of funding. That means you’ll need a long history of financial stability. Think around two years at least.
Traditional-term business funding can be a smart choice for a variety of different types of businesses. The money can be used for everything from equipment purchases to business acquisitions to construction.
Fixed rates and predictable payments make this type of funding a suitable choice for businesses that like to follow a solid money management plan.
Even if you have a strong financial history, you may be required to offer collateral before a provider will qualify you for funding. This collateral could be anything from a down payment to your automobile.
This type of funding is mainly for well-established businesses that have a specific need for the money. That means you will have to prove that your business has a strong financial history. Expect to provide balance sheets, P&L statements, and business and personal tax returns. You will also need to tell the lender what you plan to spend the money on.
One last disadvantage is that you’ll have to start paying back your funding as soon as you get the money, even if you’re not ready to use the money. That means you’ll be paying interest on money that might not be making you money yet.
Traditional-term business financing is perfect for traditional businesses that can prove they are sustainable, but need to make a long-term investment in order to be more profitable.