Boost your business: How do installment loans work for businesses?
Making major purchases for your small business can be a real headache.
Taking out a loan can cost you more over the long term but saving up to pay cash takes time.
The real question though, is how do installment loans work?
Use this guide to learn how to take out an installment loan, what they’re used for, and what you can expect the terms to be.
How Do Installment Loans Work?
Most people wonder what an installment loan is when they first hear about them. At their most basic installment loans let you borrow money and pay it back over a set number of payments.
If you’ve ever taken out a mortgage to buy a house you’ve had an installment loan. They’re attractive to businesses because of how easy it is to schedule and amortize purchases.
It gives you a reliable set of payments on a potentially high-cost purchase. In many cases, the end of the loan will coincide with the end of use date for the item purchased.
You can choose between a secured or unsecured loan. Secured loans are backed with the good they’re used to purchase. This allows the lender to repossess whatever you bought with the money in the event of nonpayment.
It’s important to spend some time checking out potential lenders. You should find the best possible terms you can get.
Installment loans also allow a business to build up its credit. A history of on-time payments stretching back years allows a business to borrow more when needed.
Vehicle & Equipment Loans
One of the most common business installment loan types is vehicle loans. Lots of companies need to provide cars, trucks, and other specialized vehicles to their employees.
Paying cash up front is a major burden for any company, no matter how large or small. Taking out a standard vehicle installment loan on one or a fleet of vehicles spreads these payments out over 12, 24, or even 48 months.
Vehicle loans are always secured loans. The vehicle itself is assigned a fair market value and the borrower is given a fixed rate based on their credit.
Heavy machinery, excavation equipment, and other types of fixed capital purchases are generally bought on installment.
If you’re looking to start your own business an installment loan is one of the best ways to do so. As long as you and your partners have good credit or suitable assets this funding will be available to you.
To do this you’ll need a comprehensive business plan. A great place to start is the Small Business Administration. They exist to help entrepreneurs get started and hit the ground running.
Weigh Your Options
So, how do installment loans work? They let you pay for a large purchase over time and build your credit while doing it. Business installment loans are one of the best ways to start a small business, purchase equipment, or expand your operations.
Check out our business topics page for more useful tips and informational articles on entrepreneurship and small business topics.
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