Fresh perspective for financial success

The Key to a More Affordable Loan? Longer Terms

When considering the affordability of a business loan, borrowers often focus heavily on interest rate. While your rate impacts your payments, another factor has a more immediate and significant impact—and it’s often overlooked: the term. 

Your loan term, or the amount of time you have to pay your loan back, directly impacts how much of your loan you repay each month.  

Here’s what you need to know about the importance of your loan term: 

  1. A longer loan term means lower payments 

 Spreading the same loan amount over a longer repayment period means the amount you pay each month is less. For example, if your principal balance were $126,000 with a term of 3 years, your monthly payments would be $3,500, plus interest. If you work with a lender who allows you to extend that term to 12 years, your monthly payment would only be $875 a month, plus interest. That’s a difference of over $2,600 per month in your pocket.  

  1. Lower payments leave you more cash on hand 

A loan itself improves your overall liquidity. When combined with less revenue going toward loan payments each month, you end up with even more cash on hand for operational costs, investments, and unexpected expenses. Especially heading into the new year, having a robust cash flow is critical for building on your progress toward larger business goals.   

  1. More cash on hand helps you reach your goals 

Most borrowers use a loan to consolidate debt or make some kind of purchase or investment. In either case, having a longer loan term–with lower payments and ultimately more cash on hand–gives you increased flexibility and a financial cushion, should you need it. With an injection of cash from the loan itself, as well as more capital on hand each month, you have the funds you need to accomplish your goals. 

The impacts of a longer loan term are clear. While interest will always play a part in the affordability of your loan, longer terms can give you the financial flexibility to achieve your business goals without compromising your liquidity. BHG now offers business loans with terms up to 12 years.* To see how affordable your monthly payment could be, try our free Payment Estimator today.  

*Subject to credit approval. 12-year loan terms not available for all credit profiles. 

Chris Panebianco

Chris Panebianco is BHG's Chief Marketing Officer, responsible for leading marketing initiatives to support the company's suite of financial solutions. Chris has more than a decade of experience in financing for licensed healthcare practitioners and other highly-skilled professionals.