Short answers on picking a loan term, matching a cost to a funding product, the papers a payroll request may need and the questions worth asking before signing. Figures in the term-length case are invented.
Three years or five on a term loan? A Kalispell, MT finishing contractor compares payments
The length of a term loan moves two numbers in opposite directions: a longer term lowers each payment and raises the interest paid overall. Each funding partner decides which terms it offers on a request.
Illustration only, invented figures: a finishing contractor borrows $41,260 at 11.38% a year. Over 36 months each invented payment is $1,358.24 and the total repaid is $48,896.64; over 60 months the payment falls to $904.93 and the total rises to $54,295.80. Points to compare when more than one term is on the table:
- The monthly payment under each term
- The total repaid under each term, not only the payment
- Whether the rate changes when the term gets longer
- How the payment sits against the business's slowest months
In this invented case the five-year term frees $453.31 a month and costs $5,399.16 more by the last payment. A contractor with a steady flow of jobs may lean toward the shorter term; one whose deposits dip between jobs may care more about the lower payment.
Different funding products, seen from Kalispell, MT real estate offices budgeting for a team buyout
Each product fits a different kind of cost. For a team buyout, where several people in the office buy the owner's stake, a term loan with fixed payments is the closest fit. The others in brief:
- Line of credit: draw, pay down and draw again for costs that come and go
- Working capital loan: a single sum for running costs, cleared in monthly payments
- Equipment financing: a machine paid for over time, with the machine as collateral
- Inventory financing: stock or job materials, with the goods as collateral
- Merchant cash advance: cash now, collected from future card sales
When a cost could fit two products, a request can name the cost and leave the choice open. The partner reviewing it may answer with the product that suits the business, or with two.
Business loan questions and paperwork for a Kalispell, MT real estate office planning for payroll
A partner may judge a payroll request on whether deposits refill the account. For a real estate office paid at closing, the useful papers show when closings are expected and how payroll has been met in past months.
- Recent business bank statements
- Pending closings and the date each is expected
- Payroll records for recent months
- Any line or loan already open
Which of these a partner wants varies from one partner to the next. Nothing on this list is needed before the first call.
Closings that slip are a risk a partner may weigh, comparing how many closings are pending against how many the office needs to cover the payroll it is asking about.
A shop purchase for a Flathead County, MT auto repair business or home builder: business loan questions
Buying a shop here means buying the business, its equipment and its customer list. The building or land is a real estate question outside this site. Before signing any offer for a purchase, an owner can ask:
- Does the rate stay the same from the first payment to the last?
- How many dollars leave the business, all told, by the final payment?
- Does paying off early bring a charge, or save interest?
- What collateral is asked, and must the owners sign personally?
A home builder buying another builder's equipment and open contracts can ask the same four questions.
By Rainline Capital ยท Updated