If you’re interested in taking out a loan to help you get your business off the ground, then consider an installment loan.
This is a great financing solution for anyone who wants to minimize risks when investing in their business. By getting these types of loans, your payments will be fixed and consistent. In other words, you and your business can rest assured that you’ll pay the same amount every month. Therefore you’ll be in control of what you owe, and you’ll minimize the chances of getting into debt.
But exactly, what is an installment loan?
Keep reading to find out!
What Is an Installment Loan?
An installment loan is any type of loan that offers any small business or individuals access to capital that is refunded consistently every month. Once you obtain the loan, you (the borrower) then pay each month the same amount for the duration of the terms which both parties initially agreed upon.
If you’re familiar with mortgages or car payments, then you might have a good understanding of what an installment loan is. But, just as a refresher: each month, you pay the same amount at a certain interest rate.
With installment loans, usually, the interest is also fixed, meaning it doesn’t go up. Consequently, the payments will stay the same every month for the duration of the loan and until you pay it off completely.
Installment loans are perfect for business owners that need to make purchases but can’t pay the total amount upfront or don’t want to do it, so they don’t stress their business finances.
How to Qualify for an Installment Loan
The requirements of a term business loan vary from lender to lender, but for you to get a general idea, here are the most common requirements:
- Time in business: most lenders will require you to have 1 or 2 years in business to approve the loan.
- Bank statements/cash flow: the lender will want to make sure you have good finances.
- SSN: lenders will need you to have a Social Security Number.
- Credit score: you will need a good credit score to approve the loan. As a rule of thumb, a credit score of 600 is what most lenders will require.
- Annual sales: your business should generate consistent sales/revenue, expect to be asked to generate from $50,000 to $100,000.
- Collateral: many lenders (not all) will ask for collateral to secure the loan.
- Business plan: some lenders may require you to present a business plan detailing how you intend to use the loan and the ROI.
As you see, you are expected to have a healthy business to qualify for a loan. But the truth is that most lenders don’t approve smaller businesses or those that have only been operational for a short time.
But fret not; there are many lenders out there who trust smaller businesses and are willing to help you. Camino Financial is one of them. To qualify for a loan with us, you need:
- You only need to have been in business for 9 months.
- You can apply with an SSN or an ITIN.
- We don’t require you to have a credit score or previous credit history.
- You need to have sales of $30,000 annually.
- We don’t require collateral nor a business plan.
Should I Get an Installment Loan
Installment loans vary greatly depending on the specific nature of the loan (mortgages, personal loans, business loans, vehicle loans) and the lender. Before you decide on a product and lender, you should have a clear idea of the following:
- What use are you going to give the loan?
- What is exactly the amount you need?
- Does the lender offer you a fixed or a variable interest rate?
- What is the term length you’ll choose? (in other words, the number of months you’ll be making payments towards the loan)
- What other features does the repayment plan include? (for example, can you pay off your loan completely before the term ends without being penalized?)
- What is the pricing structure of the loan? (in other words, what other fees besides the interest rate will you have to pay that impact the price of the loan?)
- Is collateral required to secure the loan?
- What other requirements do you need to meet? (for example, what is the minimum credit score required to apply?)
- What other benefits does your lender offer? (discounts? Business resources? Etc.)
Keep in mind that the answers to these questions will greatly affect the monthly installments and the total price of the loan.
Pros and Cons of an Installment Loan
If your business needs a large loan to make a purchase or make an investment, then installment loans can help you go a long way. Yet, despite all the wonderful features of an installment loan, some downsides are worth considering.
The main benefit of an installment loan is that you can expect to pay the same amount every month, which can be a lot easier to manage. Being able to stay on top of your payments will reflect well on you and your business when the time comes to get a new loan in the future. Your lender will probably report each of your monthly payments to one of the main credit bureaus in the U.S. In the future, banks or lenders will gladly loan out more capital to you and your business when they see your payment history. Overall, an installment loan (and your ability to pay it consistently) demonstrates to the lenders that you are trustworthy and responsible.
That being said, there are some cons to installment loans that are important to know. You might not get the full amount you need for your business. There can be times when a lender identifies a few factors that make you not eligible for the amount you initially asked for. So there’s a chance that you get stuck with a loan that is not enough to cover all your business needs.
What Types of Loans Are Not Installment Loans?
These loans are fairly easy to get, but there is a catch, and that is the interest rates are quite high. For businesses that need access to quick cash, this might be an option, but remember that payday loans are much more expensive in the long run.
If you own a car, then title loans might be a good fit for you. Title loans work by requiring applicants to put up a specific type of collateral in exchange for the loan if you default, for instance, your vehicle. This is so that the lender can be protected in case you do not pay the loan back.
Although credit cards are a great way to fund some of your business needs, there are downsides. For example, you can expect to pay high-interest rates on your principal balance unless, of course, you pay off the statement balance every month. That might be a tall task for a new or recently established business. Also, when you take out a credit card, you only have a certain amount of credit that you can spend. You are capped at wherever the credit card company decided to limit you based on your financial credentials.
Lines of Credit
A line of credit provides a certain amount of funds based on your needs. You can renew these loans easily, but the interest rates can be quite high. You may also need to put up collateral if you don’t qualify for an unsecured line of credit. With secured lines of credit, the terms are typically more flexible.
Camino Financial: Flexible Installment Loans to Cover Your Business Needs
If you need help navigating the complicated world of loans, then Camino Financial is here to help.
Our business loan specialists will study your business and profile to match you with the best financial solution. You’ll receive the right amount of funds during the right term, so you have enough to invest in your business without stressing your finances. Our installment loans include fixed monthly payments and fixed interest rates, so you always know what you are paying every month, and you don’t get any unpleasant surprises.
To tell you a little more, our installment loans range from $5,000 to $400,000 and have terms from 24 to 60 months. We only charge you one closing fee – nothing else, no hidden fees. If you decide to pay off your loan completely before the term ends, you won’t be penalized. Best of all, unlike other lenders, you won’t need any collateral when applying for a loan with us.
Want to know more?
We invite you to use our business loan calculator to have a clear picture of what your loan and your monthly payments would look like if you choose to work with us.