Term loans provide a lump sum repaid over a defined period with predictable payments. Compared to short-term loans, term loans offer longer repayment flexibility, ideal for investments taking time to generate returns (expansion, equipment upgrades, marketing, debt consolidation).
A business term loan is a financing product where a business receives a lump sum and repays it over a set term. Repayment is commonly monthly, although schedules and structures vary by lender and program. Term loans can be secured or unsecured depending on the borrower profile, loan amount, and underwriting requirements.
Not all “term loans” are the same. Program fit depends on term length, pricing structure, collateral requirements, and documentation standards.
Identify the funding purpose, set a budget, and determine the repayment timeline.
Lenders review cash flow, credit, business history, and documentation thoroughly.
Once funded, you repay according to the agreed schedule. Predictable payments support cash flow planning.
Main factors include term length, payments, amount, rate, collateral, documentation.
Term loans generally range from six months to five years, with longer terms lowering monthly payments but slightly increasing total interest costs.
Payments are usually monthly, though some lenders allow weekly or bi-weekly schedules, requiring careful cash flow management and planning.
Loan size depends on business revenue, cash flow, credit history, and purpose, ranging from small operational needs to substantial growth financing.
Interest rates vary based on risk, term, and security, with fixed or variable options influencing total repayment amounts.
Some loans are secured with collateral like equipment or personal guarantees, while others are unsecured, impacting lender approval and terms.
Lenders typically require financial statements, tax returns, bank records, and sometimes business plans, affecting approval speed and loan conditions.