When you ask a lender “What are the repayment terms?”, you’re figuring out how much you’ll pay, how often, and for how long — plus what happens if you need flexibility.
Here’s what to cover when getting the answer:
1. Loan Length (Term)
- Short-term → Usually 3–18 months (higher monthly payments, lower total interest).
- Medium-term → 1–5 years.
- Long-term → 5–25 years (lower monthly payments, higher total interest).
- Ask:
- How long is the repayment period?
- Can I choose a different term length?
2. Payment Frequency
- Monthly → Most common.
- Biweekly or weekly → Can reduce interest slightly.
- Daily (common in merchant cash advances) → Higher pressure on cash flow.
3. Payment Amount & Structure
- Fixed payments → Same amount each time.
- Variable payments → Change with interest rates or seasonal revenue.
- Balloon payments → Small regular payments, then one large final payment.
4. Early Repayment Rules
- Can you pay off the loan early without penalties?
- Will early payment save you interest?
5. Flexibility Options
- Payment pauses for emergencies
- Ability to refinance later
- Adjusting the payment schedule if business slows down
💡 Why this question matters:
Even a loan with a great interest rate can hurt your business if the repayment schedule strains your cash flow. Matching the term and payment frequency to your revenue pattern is critical.
I can prepare a Repayment Terms Comparison Sheet that lays out short-, medium-, and long-term loans side-by-side so you can see the real monthly impact before committing.
Repayment terms define how and when you will repay the borrowed funds. Knowing these details is essential for effective cash flow management and financial planning. Consider the following aspects:
- Loan Duration: The length of time over which you will repay the loan. Shorter terms generally mean higher monthly payments but less interest paid over the life of the loan, while longer terms reduce monthly payments but increase total interest costs.
- Repayment Schedule: This could be monthly, quarterly, or another frequency. Consistent, predictable payments help with budgeting, while irregular schedules may require more careful cash flow management.
- Grace Periods: Some loans offer a grace period before repayment begins, which can be beneficial if you need time to generate revenue from the loan-funded investment.
- Balloon Payments: Some loans might have lower monthly payments with a large final payment due at the end of the term. It’s crucial to plan for this significant expense.
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