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Term loans

Term Loans for Schools

Updated: Nov 19, 2019

Term Loans for Schools

When you possess a unique talent or a deep-rooted love for a particular subject, it’s natural to want to share that knowledge with the world. Launching a school to teach others what you know may seem like the natural course if you also have an entrepreneurial drive.

Running a school for profit is just like owning any other kind of small business, meaning it takes a certain amount of capital to keep things flowing smoothly. When you’re short on cash or you don’t want to spend down all of your assets to finance a large expense, a term loan can fill the gap. Keep reading to learn:

  • What a term loan is
  • How you can use a term loan to grow your school
  • What it takes to qualify

Term Loans Explained

If you’ve never sought out small business financing before, it’s easy to get confused by the variety of choices. The best way to understand how a term loan works is to think of a mortgage or car loan. The lender offers you a lump sum of money, which you agree to repay over a set period of time. Your principal payments are fixed and your interest rate may also be fixed or variable.

Term loans are different from something like a business credit card or line of credit because you can’t draw against your available credit over and over again. As you make payments, the balance goes down until it’s zeroed out. If you want to borrow more money, you’d have to take out a new loan.

Term loan advantages

Term loans offer some distinct benefits, especially if you’re working with an online lender. For one thing, the interest rates and fees are often competitive with what banks offer. Funding Circle, for example, offers a term loan with terms from $25-$500K *Funding Circle may partner with other lenders to provide a full range of loan options to qualified borrowers, and competitive interest rates. That’s a much more affordable way to fund your school than something like an invoice loan or merchant cash advance, which may come with a double-digit rate.

Besides that, term loans offer you a certain amount of flexibility when it comes to repayment. If you’re opting for a short-term loan, you may be able to choose a term ranging from three to 18 months. If you need longer to pay, on the other hand, it’s possible to get a term loan with a five- or even 10-year repayment period. Funding Circle loans offer extremely flexible terms with repayment times between 6mos. to 5 yrs, allowing you to design the best loan for your business.

Term Loans for School Financing

So now that you know how term loans work, the question is how can you use one of these loans to meet your school’s financial needs? The good news is, you’ve got a very broad scope of possibilities. Here are some situations where a term loan could prove useful:

  • You run a cooking school and some of your major appliances need to be upgraded but you don’t want to charge those expenses to a high-interest credit card.
  • You started a small Montessori school that’s outgrown its current space and you need capital to expand into a larger building.
  • You own a school that provides certification and training to yoga instructors and you want to create your own line of yoga gear, books, and videos but you lack the necessary cash to do it.
  • You operate a music school and you need funds to stock up on supplies and purchase new instruments ahead of the fall semester but the bank won’t give you the green light on a loan.

That last scenario is drawn from real life. Jenny Shaw, founder, and CEO of New York City’s Tone Academy of Music spent 15 hours filling out a loan application for her bank, only to be denied. She was able to expand her business on her terms. Learn more about Jenny’s story in the video below.

Qualifying for a Term Loan

When you apply for a term loan, lenders are going to focus on things like your credit score, how long your school has been open and how much revenue it generates annually. Funding Circle, for example, works with borrowers who have:

  • 620+ personal credit score
  • 2+ years of operating history

Looking at your school’s financials and your credit rating can help you narrow down your choices. From there, you can move on to comparing terms, rates, and fees to find the loan that’s the best match for your needs.

Michael Jones

Michael Jones is a Senior Editor for Funding Circle, specializing in small business loans. He holds a degree in International Business and Economics from Boston University's Questrom School of Business. Prior to Funding Circle, Michael was the Head of Content for Bond Street, a venture-backed FinTech company specializing in small business loans. He has written extensively about small business loans, entrepreneurship, and marketing.

Tags: Term loans

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