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Multi-year term loans are typically utilized in different kinds of industries where businesses sell their goods, products, or services to other businesses or also for industries where the businesses sell directly to consumers, unlike other types of loan options where the type of industry restricts the type of lending product available to borrowing businesses. Multi-year term loans are used by many businesses for a wide variety of costs, as this type of business term loan has very limited restrictions or covenants that coincide with the lending product. This makes a multi-year business term loan a great fit for businesses with strong credit profiles.

The application process for multi-year term loans is much easier than applying for other types of financing products, like an Asset-Based or SBA business loan. Although there is less paperwork and fewer requirements when applying for a multi-year term loan, the financial information, tax return, and other documents that the borrowing business provides for the lender to review will play a large role in determining the qualification status.

Asset-based term loans are generally most appropriate for business to business (b2b) industries, because these types of companies have significantly more collateral types than most business to consumer (b2c) companies. For example, manufacturers often have large, valuable pieces of equipment and machinery that hold their value. Also, these types of companies have accounts receivables, inventory, and other types of materials, whereas a restaurant might only have furniture, fixtures, and equipment to offer as collateral.

The application process for asset-based lending programs is typically paperwork intensive, and will require the borrowing business to have all of their financial information organized to ensure a smooth application process. Outside of the standard documentation for other types of business term loan programs, asset-based term loan applications will require a detailed list of the assets the borrowing business has to offer so that the lender will understand the collateral available to secure the funds borrowed. Additionally, it is not uncommon for lenders to conduct a field audit by either visiting or sending a representative to visit the business to evaluate the value of the assets used for collateral.

An equipment term loan can typically be structured as a business equipment loan or an equipment lease program, which can both be used in virtually any and all industries. Whether the borrowing business is in a b2b or b2c industry, if equipment is a necessity for operation, an equipment term loan can most likely provide the funds and flexibility to cover the costs to obtain the best equipment available.

The process to apply for equipment term loans differs depending on the cost of the equipment being purchased. For less expensive, “small ticket” equipment purchases, which are equipment expenses under $250,000, lenders will only need to review an online application, the invoice for the equipment purchase, and a credit report for the borrowing business. Most of the time, there is no additional financial documentation required for equipment term loans less than $250,000. On the other hand, for more expensive, “big ticket” equipment purchases, which are equipment expenses over $250,000, most lenders will need to check a full financial document package to determine the eligibility for the borrowing business.

If the commercial real estate that a borrowing business has available to put up for collateral is extremely valuable, commercial real estate works as a great asset to use as collateral for a business term loan. In the event that the borrowing business has major issues, the lender can gain control of the commercial real estate from the borrowing business owner.

From a lender’s perspective, the faster and easier that they will be able to sell the inventory in the event of a default, the higher the value they will assign and the more money they will be able to offer the borrowing business. Depending on the specific type, in some cases, lenders will conduct field audits to assess the value of the inventory. By sending a representative to the location where the inventory is held, a more accurate value will be placed on the inventory to provide the maximum LTV amount.

Lastly, purchase orders (PO) are one of the most common forms of collateral. A purchase order is a document made by your customer to authorize a business transaction with your company. It outlines the terms of the sale, including the payment terms, shipping dates, price, quantity, and more. Once you accept the purchase order, lenders can use it as collateral for your term loan. Generally, the LTV against purchase orders is between 30% to 40%. But once the purchase order is fulfilled, the PO becomes an invoice and you’re can advance the remaining percentage.