Installment loans are loans that are repaid with a fixed number of payments over a period of time. Whether you're a small company that needs to buy computer equipment or a large corporation that wants to purchase factory machinery, business installment loans can help you invest in necessary fixed assets while maintaining a working budget.
Significance
Business installment loans are secured or unsecured loans offered to businesses that meet certain eligibility requirements. A business interested in consolidating debt, purchasing trucks or vehicles, or investing in expensive computer or industrial equipment can apply for a business installment loan to cover the expense. Installment loans are particularly valuable for a business that does not have enough cash on hand to pay for larger expenses.
Types
Business installment loans can be either secured--backed by collateral--or unsecured, and may be either a fixed rate or variable interest rate loan. Business installment loans are available through several financial institutions, and all loans are subject to credit approval. Most banks and financial institutions offer several types of installment loan products for businesses of all sizes.
Function
Installment loans are designed to provide long-term financing for large-scale investments needed for business operations. The money can only be used for specific expenses listed in the loan agreement, and a business may be required to document all expenses as part of the loan agreement. Installment loans may be increased at a later date if a business finds it needs additional funding over the course of the loan.
Considerations
Installment loan qualification and eligibility varies by financial institution, but most require a company to have been in operation at least two years. A company applying for installment loans needs to have a strong business credit history to prove creditworthiness--the ability to pay back the loan over the required repayment period. Some lenders also require a formal review of the company's management team and a review of the business plan and financial projections. The lender may request financial statements from a company's certified public accountant or a copy of federal tax return documents.
Benefits
Installment loans offer several benefits for businesses and can be especially valuable for those who cannot obtain funding from independent investors or personal accounts. Installment loans can be used to pay for expensive machinery, office equipment and even company vehicles if needed. Most installment loans available through a financial institution offer flexible rate and term options, and the bank or lender can set up automatic deductions from a business checking account for convenience.
