More On Bank Term Loans for Small Businesses

Entrance Requirements:  You must meet the following conditions to compete for one of the five available scholarships:

• You must be ordinarily resident in a country outside of the United Kingdom or it’s dependencies and the European Union
• You must hold an ‘international’ fee status
• Students who have applied for a Postgraduate programme at the University by 15 November 2017 can apply for a scholarship worth 100% or 50% of the Year 1 international tuition fees
• You must accept an offer made by the University by following the instructions, which will be sent to you. Please note that students holding both conditional and unconditional offers are eligible to enter
• You must be joining Year 1 of a Postgraduate programme commencing in January 2018
• You must not have previously studied at the University
• You must not be joining the University through an articulation agreement
• Employees, agents or contractors of Northumbria University are not eligible

English Language Requirements: Applicants whose first language is not English are usually required to provide evidence of proficiency in English at the higher level required by the University.

Application Procedure:

Students must submit an online application for a place on a Programme.

How to Apply:

University will ask you to submit a video lasting no more than 30 seconds which we will share on the University’s social media channels. Your video should answer one key question:

• Why is Northumbria a great place to prepare for your future?

Application deadline: November 15, 2018

Types of Bank Term Loans

The American Bankers Association generally recognizes two types of bank term loans. The first is the intermediate term loan which usually has a maturity of one to three years. It is often used to finance working capital needs. Working capital refers to the daily operating funds that small business owners need to run their businesses.

Working capital loans, however, can be short-term bank loans and often are. Companies often want to match the maturities of their loans to the life of their assets and prefer short-term bank loans. In reality, bank term loans are actually short-term, but because they are renewed over and over, they become intermediate or longer term loans.

Intermediate Bank Loans

Intermediate bank term loans can also be used to finance assets such as machinery that have a life of around one to three years, like computer equipment or other small machinery or equipment.

Repayment of the intermediate term loan is usually tied to the life of the equipment or the time for which you need the working capital.

Intermediate term loan agreements often have restrictive covenants put in place by the bank. Restrictive covenants restrict management operations during the life of the loan.

They ensure that management will repay the loan before paying bonuses, dividends, and other optional payments.

Long-term Bank Term Loans

Banks seldom provide long-term financing to small businesses. When they do, it is usually for the purchase of real estate, a large business facility, or major equipment. The bank will only lend 65% – 80% of the value of the asset the business is buying and the asset serves as collateral for the loan.

Other factors that small businesses have to deal with in bank term loan agreements are interest rates, creditworthiness, affirmative and negative covenants, collateral, fees, and prepayment rights. Creditworthiness has become particularly important since the Great Recession of 2008.

Bankers prefer self-liquidating loans where the use of the loan money ensures an automatic repayment scheme. Most term loans are in amounts of $25,000 or more. Many have fixed interest rates and a set maturity date. Payment schedules vary. Term loans may be paid monthly, quarterly, or annually. Some may have a balloon payment at the end of the term of the loan. A balloon loan is when the sum of principal and interest are not fully amortized over its term, often to keep the periodic payments as low as possible.

Thus, the remaining sum, usually principal, is due at the end of term.

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