Event planners have a lot in common with magicians. They’re tasked with pulling together an amazing display, without revealing the hard work that goes on behind the scenes. The ultimate party trick? Making sure that every event goes off without a hitch.
Getting an event planning operation off the ground, or maintaining one, requires something that every small business needs: capital. Finding the right source of financing for your business is the challenge. Fortunately, a term loan can be a solution for a number of common financial challenges event planners face.
Keep reading this guide to learn:
- What a term loan is
- How you can use a term loan to support your event planning business
- How term loans compare to alternative business financing options
Let’s start by taking a closer look at how term loans work.
What Is a Term Loan?
The mechanics of a term loan are fairly simple. You borrow a certain amount of money from a lender, with the agreement that you’ll repay it over time. Short-term loans generally have repayment terms lasting three to 12 months. Long-term loans may stretch that up to 10 years.
Term Loans can have a fixed interest rate, meaning it stays the same for the life of the loan, or a variable rate. Variable rates are tied to an index rate and they can go up or down if that index rate changes. Depending on the loan terms, payments may be due weekly, biweekly or monthly.
How Event Planners Can Use a Term Loan
The great thing about term loans is that they’re versatile. You can use them to meet a number of different financing needs. For example:
- You’ve been in business for a few months but you’re not getting the kind of traction you’re looking for. You decide to step up your marketing campaign, starting with a revamp of your website but you need funding to hire a designer.
- Your event planning business is starting to generate a lot of buzz, leading to more bookings. You decide the time is right to hire and train a couple of assistants to help you stay on top of things.
- You’ve been running your event planning business out of your home but you’re ready to set up permanent premises. You need cash to lease a space, get insurance, purchase supplies and buy office equipment to get started.
- You come across a deal on supplies that you can’t pass up but you don’t want to drain your cash savings to capitalize. You opt to use a short-term loan to take advantage of a deep discount on pricing.
- You’re currently working for a larger event planning firm and you’re offered a shot at becoming a partner because one of the firm’s founders is leaving. The catch is that you’ll need a certain amount of money to buy into the partnership.
- You have a game-changing opportunity, but between decor, staffing and beverages, you don’t have enough capital to cover the expenses for putting on the event”plus, waiting 60 days for your clients to pay you back.
In each scenario, a term loan could help you get things done. The beauty of a term loan is that once you’re approved, you can put the funding to work the best way you see fit.
Term loans have other features that make them appealing. For one thing, you can pick a repayment term that fits with your business’s budget. You can choose a shorter term if you think you can repay the loan fairly quickly, or stretch it out over a period of years if you don’t want to tax your cash flow as much.
If you’re borrowing from an online lender, you can usually get the money in less time than a traditional bank would take. Instead of waiting three or four weeks for funding, you could get it in two to three business days. That’s a huge plus if there’s a growth opportunity on the horizon and time is of the essence.
What Other Financing Options Do Event Planners Have?
There are several good reasons to consider a term loan when financing your event planning business but it’s not the only option. There are other types of debt financing that may be a better fit for your business’s needs.
A Small Business Administration loan, for example, allows qualifying business owners to borrow as little as $5,000 or as much as $5 million. If you’re just starting up, you may have an easier time qualifying for an SBA loan, since many term loan lenders require you to have at a year of operating history under your belt.
Accounts receivable financing is another possibility. This type of financing involves borrowing against the value of your unpaid invoices. If you allow your clients to pay on net 15, net 30 or net 60 terms, you can use them to secure financing. The major drawback of accounts receivable financing is the interest rate, however. The effective annual percentage rate”meaning the annualized cost of borrowing”can easily outstrip anything you’d pay with a term loan or SBA loan.
Get Your Financials In Order Before You Apply
Regardless of which financing path you pursue, it’s important to put your best foot forward before approaching a lender. Run a cash flow analysis and put together a profit and loss statement. Get your tax returns in order and check your personal and business credit scores. The stronger your financial profile, the better the odds of landing a loan and getting a favorable interest rate to boot.
Bond Street is transforming small business lending through technology, data, and design. Bond Street offers term loans of up to $1 million, with interest rates starting at 6%.