{"id":12173,"date":"2024-06-24T01:00:00","date_gmt":"2024-06-23T17:00:00","guid":{"rendered":"https:\/\/dollarsandsense.sg\/business\/?p=12173"},"modified":"2024-06-23T23:41:54","modified_gmt":"2024-06-23T15:41:54","slug":"business-term-loan-revolving-loan","status":"publish","type":"post","link":"https:\/\/dollarsandsense.sg\/business\/business-term-loan-revolving-loan\/","title":{"rendered":"Business Term Loan Vs Revolving Term Loan: Which Should You Choose For Your Business?"},"content":{"rendered":"\n

Business loans provide the essential capital needed to fuel growth, manage cash flow, or invest in new opportunities. In today’s competitive financial landscape, understanding the various types of business loans and their terms is crucial for business owners.<\/p>\n\n\n\n

Business Term Loan<\/strong><\/h3>\n\n\n\n

A Business Term Loan is typically a one-time lump sum loan with a fixed repayment period and is typically utilised by businesses for large purchases such as expansion or equipment purchase.<\/p>\n\n\n\n

OCBC’s business term loan<\/a> offers a loan quantum of up to $700,000. The interest rates for these loans can vary based on the borrower’s credit profile and specific loan terms, generally starting from 7% per annum. Repayment periods are flexible, usually spanning from 1 to 5 years. This loan is given without collateral. However, the company must be locally incorporated for at least 2 years, so this loan is not suitable for new startups.<\/p>\n\n\n\n

Read Also: <\/em><\/strong>Complete Guide To Commercial Property Loans For Singapore Businesses<\/em><\/strong><\/a><\/p>\n\n\n\n

Revolving Term Loan<\/strong><\/h3>\n\n\n\n
\"\"<\/figure>\n\n\n\n

A Revolving Term Loan is basically a loan that allows for flexible repayment and re-borrowing as required. Businesses are given an approved credit limit and may borrow up to this limit. This loan typically does not have a fixed repayment term, and the borrower can choose to pay off the loan at an earlier date without penalties, in order to incur less interest. The borrower can also choose to re-borrow more funds up to the limit as required.<\/p>\n\n\n\n

OCBC<\/a> has such a loan which has a 6- or 12-month repayment period for each withdrawal, where businesses can loan up to $200,000. The interest rate is 8.88%, and processing fee is 1.50%. OCBC\u2019s revolving term loan allows for locally incorporated companies to tap upon this loan.<\/p>\n\n\n\n

Read Also: <\/em><\/strong>Guide To Understanding A Revolving Term Loan And How It Can Help Businesses With Cash Flow<\/em><\/strong><\/a><\/p>\n\n\n\n

Which Is better For Your Business?<\/strong><\/h3>\n\n\n\n

Each loan has its pros and cons. For instance, the Business Term Loan is a one-time lump sum loan, and interest is paid on the full sum at the point of loaning. A business can choose to use the loaned funds for cashflow needs, however, interest is charged at the moment that funds are credited into your account, whereas the Revolving Term Loan only charges interest on remaining utilised funds. If money is repaid for a Business Term Loan, it cannot be re-borrowed, so businesses have to be careful about repaying their loans early.<\/p>\n\n\n\n

The main downside of Revolving Term Loan is the fact that the loan quantum is only $200,000. While this sum of money may perhaps be enough for a small business to expand operations, the repayment period is typically quite short (6- to 12-month period), which may make it difficult for a small-scale business to be able to generate that amount of revenue in such a short time. A Business Term Loan is perhaps more suitable, since it gives up to a 5-year period to repay this loan.<\/p>\n\n\n\n

Read Also: <\/em><\/strong>Complete Guide To Enterprise Financing Scheme \u2013 Fixed Asset Loans (EFS-FA) In Singapore<\/em><\/strong><\/a><\/p>\n\n\n\n

Combination Of Loans<\/strong><\/h3>\n\n\n\n

Businesses are not likely to use only one loan for their source of funds. Both the Business Term Loan and the Revolving Term loan can be used at the same time \u2013 the Business Term Loan could be used to fund heavy equipment purchase, whereas the Revolving Term Loan could be used for short-term cashflow, such as paying salaries and other monthly expenses, while waiting for account receivables to come in.<\/p>\n\n\n\n

Short-term loans are better for helping businesses to cope with times where there is sudden or unexpected demand for cashflow. On this front, other loans could also be useful, such as Invoice Financing.<\/p>\n\n\n\n

Read Also: <\/em><\/strong>Guide To Understanding How Invoice Financing Works In Singapore<\/em><\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"They’re good for different scenarios\n","protected":false},"author":28,"featured_media":12176,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[92],"tags":[881,860,1923,1183,1924,1040,440],"yoast_head":"\nBusiness Term Loan Vs Revolving Term Loan: Which Should You Choose For Your Business? | DollarsAndSense Business<\/title>\n<meta name=\"description\" content=\"Business term loans and revolving term loans are two different loan instruments that help businesses get funding for different purposes.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/dollarsandsense.sg\/business\/business-term-loan-revolving-loan\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Business Term Loan Vs Revolving Term Loan: Which Should You Choose For Your Business? 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