Offering installment financing is a great way to grow your business. When shoppers know you offer this type of financing, they are more likely to shop with your company over a competitor who does not.
Small business loan options can come in the form of installment loans or revolving loans.
Low-Interest Rates
Small business loans can come from various sources, with traditional brick-and-mortar banks and credit unions offering long-term installment loan options. Online lenders like LendingClub also offer long-term loans with competitive rates and terms. For instance, MaxLend installment loans typically have lower interest rates than revolving lines of credit. This makes it easier for SMBs to manage their debt and repay their obligations. Additionally, interest paid on installment loans is tax-deductible, whereas the interest on revolving lines of credit may not be.
Flexibility
Long-term installment loans allow small business owners to make regular, predictable monthly payments. This helps them better budget their cash flow and plan for loan expenses. Other types of financing, such as revolving loans like a line of credit or a business credit card, have variable monthly payments that fluctuate depending on the current balance. This may be less convenient for a small business with many fluctuations in its income. Additionally, some forms of business financing require collateral. If a business cannot pay back its debt, it risks losing its assets or other valuable items. However, most small business loans offered by alternative lenders do not have this requirement, making them a more flexible choice for many small businesses.
Convenience
While revolving loans offer the convenience of taking out funds continually (and paying interest only on what you use), installment loans deliver funding in a lump sum. This makes it easier for small businesses to make large purchases that require upfront investments or can't be paid for out of current cash reserves.
Some lenders allow borrowers to apply online and impose minimum requirements such as a certain credit score or proof of business revenue. However, these requirements are often much more lenient than those traditional banks offer.
Tax Benefits
With rising interest rates, some lenders are tightening approvals for small business loans and imposing stricter terms. Some alternative lenders have lowered the documentation requirements for marketplace loans and other types of business financing, such as invoice factoring so that businesses can qualify with less financial data. Term loans are often secured by collateral like expensive equipment or business vehicles, which the lender can seize if you fail to pay back your debts. On the other hand, some revolving loans don't require this kind of security and allow you to claim a portion of the interest you pay as a tax deduction.
Flexibility
Many lenders offer various loan products, which allow them to work with small business owners to find the financing that best meets their needs. This includes various flexible and short-term installment programs like a MaxLend loan. These funds can help a new business purchase inventory, invest in a restaurant renovation project or offset seasonal dips in cash flow. And because the amount of money borrowed stays relatively consistent through the life of the loan, the monthly payments are predictable and easy to budget for.
