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Updated: March 27th, 2020
Thousands of new ideas hit the market every year, but fewer than three percent are considered to be highly successful new product launches. The biggest problem? Lack of preparation.
Many businesses are so laser-focused on designing and manufacturing new products that they don’t think about distribution, sales, and marketing until it’s too late—and don’t have a “fast growth” plan in place for ramping up quickly if the product takes off.
The odds can be even tougher if you’re a small business: the revenue and resources available to larger companies often give them a leg up over small to mid-sized operations.
That’s where term loans come in. With careful budget planning and the right injection of growth capital, you have an opportunity to trigger the sales momentum and increased cash flow you’re hoping for—without undue financial stress.
Below are three reasons to considering using a term loan to launch your next product line so it’s a homerun success.
While popular financing options such as merchant cash advances can provide funding quickly, the terms may cripple your business during a critical time of growth like a new product launch.
MCAs require you to pay a percentage of your daily or weekly credit card sales, making them inconsistent liabilities that are difficult to plan around. High rates and hidden fees can put additional strain on your company’s finances, further hindering growth.
Term loans that offer stable monthly payments can help to keep your cash flow manageable during the launch period.
Funding Circle’s personalized, responsive service can also get you a decision in as little as 24 hours, allowing you to move quickly.
Term loans are ideal if you need to make big-ticket purchases such as additional inventory, materials or production machinery.
They help spread the financial commitment of your product launch over a number of years, reducing the financial impact that the new product launch has on your business in the short-term.
Affordable monthly payments that are fixed over a 6-month to 5-year period are more manageable than a single large expense.
A term loan is more predictable — and less burdensome — than financing options such as MCAs.
If your new product launch exceeds expectations, you can save a significant amount on interest by paying your financing off early.
However, MCAs and many other short-term lenders have strict payment terms and may penalize you if you repay earlier than stated in your contract.
At Funding Circle, we never charge hidden fees or early repayment penalties, ever!
This leaves you free to reinvest the money you save on interest payments and fees in your go-to-market plan for your new product.
We’re invested in your success, and are incentivized by your ability to pay the loan back early if you wish.
Before you rush out and secure a small business term loan, research all of your options.
Make sure you weigh the advantages and disadvantages of each category of financing. Ask about fees and charges and calculate all your costs. Read the small print in a contract, and if you’re not sure of anything within the document, ask your lender. This helps you avoid any hidden financial traps that could add hundreds of dollars to the cost of your small business loan.
While it can be tempting to take out an MCA to secure growth capital quickly so you can get your new product onto the market as rapidly as possible, remember that this type of financing drives many business owners into an endless cycle of debt.
Secured term loans are a healthier option for your business because they let you spread out the financial impact of a new product launch.
Are you ready to make your next big idea a reality? Take 60 seconds to check your eligibility for a Funding Circle term business loan today!
Paige Smith is a Content Marketing Writer and Senior Contributing Writer at Funding Circle. She has a bachelor's degree in English Literature from Cal Poly San Luis Obispo, and specializes in writing about the intersection of business, finance, and tech. Paige has written for a number of B2B industry leaders, including fintech companies, small business lenders, and business credit resource sites.