- 1). Review the payment conditions of the loan you're applying for. With a term loan, you usually only pay the interest each month. If you're having a cash-flow problem, having a term loan can help you weather that storm, as you don't have to make payments toward the principal balance. Term loans can be used to expand your business: You can purchase equipment, computers, supplies and inventory for a relatively low monthly payment.
- 2). Review the conditions for a line of credit. If you consolidate credit cards with a line of credit, you'll have the convenience of just one payment to make each month. The payment on a line of credit may be lower than the combined payments of your credit cards, especially if the cards have high interest rates of interest. A line of credit usually allows you to make interest-only payments.
- 3). Check the methods for accessing your line of credit. You can go directly to a bank and direct an advance from your line of credit to be deposited right into your bank account. When you receive a line of credit, it comes with convenience checks, which resemble the checks you have for your checking account. You can use these checks to make payments to creditors and to make deposits into a separate bank account (the funds will be taken against your credit limit). Plus, with a line of credit, you're only charged interest on the funds you take out, not on the unused part of your credit line.
- 4). Review the contract time for a term loan. A term loan is typically between 3 and 10 years, but some can go up to 20 years, according to Entrepreneur.com. If you're making low payments for your term loan, your business has a chance to start turning a profit; the low payments won't interfere with your cash flow. A 10- or 20-year period also gives you time to accumulate funds to pay off the balance or refinance the balance and receive favorable terms.
Source...