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There comes a time when every business needs to consider getting additional funding to grow their business. At Fundify.io we believe when a business is in need of extra financial wiggle room it is a great problem to have!
We understand that getting business loans is tough—the process is outdated, clunky and frankly at times it can be stressful. Making the business loan process better (in every aspect) is a problem we’re absolutely in love with and why we created Fundify.io.
As a business there are a ton of great loan options when it comes to leveraging and securing financial capital to grow your business and reach your goals. In this post we’re going to focus on one of the most popular and accessible loans for small business owners.
Let’s jump right in and learn more about one of our favorite and most commonly used loans—Business Term Loans.
Fundify can help you find the right loan—it’s easy and fast
Fundify can help you find the right loan—it’s easy and fast
A business term loan, or sometimes referred to as term loan, is one of the simplest forms of borrowing money for your business.
A business term loan is a lump sum of money borrowed from a lender with agreed upon repayment terms over a specified period of time. Lenders usually provide flexible payment schedules weekly, bi-weekly, monthly, bi-monthly that can align to your specific cash flow cycles.
Business term loans are extended for periods of 1 to 10 years, while there are instances when a lender is willing to lend money for longer periods of time – Business Term Loans tend to be borrowed over a shorter time frame.
Business Term Loans are used for specific business objectives like Real Estate (property purchase, renovations etc), purchase of Equipment to make consumer packaged goods, or even working capital. Due to the straightforward application of these funds, it’s easy to agree on clear and upfront repayment timelines.
For most businesses there is usually a never ending list of expenses and bills to be paid. Some of these expenses are necessary evils in running your business and some of these expenses are activities that allow you to grow your business profits through increased gross revenue or implementing efficiencies.
Some of the most common applications of secured Business Term Loans are working capital, improvements such as renovations, headquarter expansion and upgrades, purchasing new and more efficient equipment or machinery that may cost less to operate and produce more product improving profit margins and productivity.
Small business owners often use Business Term loans to launch new products or divisions of their business whether that could be opening new offices and hiring staff in new expanded locations and territories. Or doubling machinery on site to produce new products without slowing down the production on an already steady flow of existing product sales.
What you can borrow against a Business Term Loan generally ranges from business to business, need to need and year to year depending on the economy growth and health.
There are a number of agencies that compile data and stats related to business funding, one of the most regulated and trusted sources of data is published annually by The Canada Small Business Financing Program (CSBFP).
While in this article we don’t go into detail about the CSBFP, this government organization works closely with private lenders for approving and distributing any registered loans with the CSBFP.
In its published data, over 2021-2022 over 5 thousand loans were extended to Canadian businesses valued at $1.2 billion. Year over year both the number and value of loans increased by 34% and 41% respectively. In its data set, the average CSBFP business loan was $246,507 and increase of 4.3% from 2020-2021.
While this data doesn’t include all funded Business Terms Loans in Canada, it’s a reliable enough data set to inform the conversation we’re having about how much should you borrow with a business term loan? Well, the average small business participating in this program borrowed roughly $250k. Is that how much you should borrow? The answer to this question is always—only borrow as much as you need.
Most business owners live and breathe every aspect of their business. And so, they have the best first-hand knowledge to know how much money to borrow. Consulting with business financial analysts, controllers and/or accountants will help you make dollars and sense of what to borrow, when and for how much.
Business owners, along with trusted staff and operators will be tasked with right-sizing the needs of clients and what output is required to meet profitability goals set for the business. These teams, financial statements and growth/operating plans inform not only how much to borrow but how to responsibly use that funding to achieve what you set out to do
As a business it’s always good to have financial records up to date with the latest financial snapshot of your business health. When looking to apply for a Business Term Loan what lenders will ask of you will vary, but typically you can count on the following list of items: