Find the Lowest Rates on Term Loans

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Term Loans at a Glance

A traditional term loan is probably the most common form of business loan, so it’s pretty easy to understand. You borrow a lump sum of money—usually for a specific purchase you’re making for your business—and pay the loan back over a set term, most often at a fixed interest rate.

Term Loan amount icon

Maximum Loan Amount

$25,000 to $500,000

Term Loan term icon

Loan Term

1 - 5 years

Term Loan rate icon

Interest Rates

7 - 30%

Term Loan speed icon

Speed

As little as 2 days

The Pros and Cons

  • Set payment structure
  • Suitable for a wide range of business purposes
  • Lower monthly payments than short-term loans
  • Longer payment terms than short-term loans
  • Potential prepayment penalties

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“Term Lenders” with Fundera Today!

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Compared to Other Loan Types...

Loan Type
Time to Funding
Avg. Interest Rates
Time to Funding
As little as 2 days
Avg. Interest Rates
7 - 30%
Time to Funding
As little as 3 weeks
Avg. Interest Rates
Starting at 6.5%
Time to Funding
As little as 2 days
Avg. Interest Rates
8 - 30%
Time to Funding
As little as 1 day
Avg. Interest Rates
7 to 25%
Time to Funding
As little as 1 day
Avg. Interest Rates
Approx. 3% + %/wk outstanding
Time to Funding
As little as 1 day
Avg. Interest Rates
Starting at 10%
Time to Funding
1 week
Avg. Interest Rates
1.14 - 1.18
Time to Funding
As little as 2 weeks
Avg. Interest Rates
7.9 - 19.9%
Time to Funding
As little as 1 day
Avg. Interest Rates
5.99 - 36% APR

Who Qualifies for a Term Loan?

Plenty of businesses can qualify for a traditional term loan—as long as you’ve been in business for a bit, have a good credit score, and are generating revenue.

(See more on a term loan’s minimum qualifications below.)

Not all term loans are the same, though: the interest rate, length of the term, and maximum loan size depends on your business revenues and credit rating.

Since traditional term loans have longer repayment periods than short-term loans, your business’s financials and credit score are more important.

Most Customers Who Were Approved Had...

Term Loan Annual Revenue icon

Annual Revenue

Over $300,000
Term Loan Credit Score icon

Credit Score

680
Term Loan Time in Business icon

Time in Business

Over 3 years

**Based on past Fundera customers.

What Documents Will I Need to Apply?

Driver's License
Voided Business Check
Bank Statements
Balance Sheet
Profit & Loss Statements
Credit Score
Business Tax Returns
Personal Tax Returns
“
Multi-year lenders offer loans structured similar to a bank loan--without all the hassle.
Abbey Young
Senior Loan Specialist
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How Do Term Loans Work?

Every business could use some extra cash. Whether it’s for an equipment upgrade, an order of inventory, or a new employee, a business loan could always help out.

But how can you find funding that your business can afford?

We deal with all sorts of businesses here at Fundera, and we’ve got some insight into which applications lead to which loans.

Take a look at how a term loan works—and what you’ll need to qualify for one. That will help you understand whether a term loan is the right product for you.

When You Think of Loans, You Think of Term Loans

Quick—imagine a business loan.

You probably thought of a term loan, since it’s the most common kind of business loan out there.

And simply put, they’re all about predictability.

You get a predetermined amount of money with a set interest rate, which might be fixed or variable. Then you pay that cash back over an agreed-upon amount of time in regular intervals and increments.

When it comes to term loans, there’s nothing unexpected. You know exactly what you’re getting into.

Different Kinds of Term Loans

That doesn’t mean all term loans are exactly the same, though.

Depending on your small business’s growth needs, credit rating, cash flow, revenue, and more, there are plenty of different term loans available.

In fact, you can get term loans with lengths and payment structures as varied as 1 year with daily payments to 5 years with monthly payments—and everything in between.

Similarly, loan amounts and interest rates vary according to your business’s needs and history. You can get more or less money—at higher or lower rates.

The exact details of your term loan depend on your business’s financials, but the structure will stay the same.

Bottom line?

Traditional term loans are a wide category of business financing, available both from traditional banks and alternative non-bank lenders.

Applying for a Term Loan

Getting a traditional term loan isn’t always easy, especially if you’ve got a low credit score or no collateral to secure that cash with.

In fact, collateral might be a requirement for a term loan—depending on the rest of your business’s financials—and you risk losing that collateral if you can’t repay your loan.

And while many of these lenders might not ask for a specific piece of collateral but, instead, put a “blanket lien” on your business, the same risk still applies.

(Learn more about blanket liens here.)

Don’t forget: when you apply for a small business term loan, make sure to ask if there are any prepayment penalties or other fees you should be aware of. Go over the exact terms with the lender so you can arrive at a monthly payment you know you can afford.

Your biggest help?

A term loan’s predictability.

You should be able to figure out whether a term loan will help or hurt your business from the get-go. Just understand the calculations beforehand and plan the coming months or years of spending carefully.

What's a Term Loan Good For?

The point of a term loan: to help you finance something big for your business.

Whether you need to make a specific equipment or inventory purchase, want more working capital, need to refinance other business debts, are looking to meet tax or payroll obligations, or something else entirely, a small business term loan can help you out.

And as it turns out, there are few loan use restrictions, if any—though, generally speaking, it’s best practice to spend that money creating more revenue for your business.

Since borrowing isn’t free, you want to come out of a loan with more money than you began with. It’s all in the planning ahead.

If used the right way, traditional term loans can help you push your business to the next level—introducing new equipment, locations, products, or marketing campaigns into your toolbox.

To distinguish traditional term loans from their shorter-term alternatives, we usually refer to them as “medium-term” loans instead.

Apply to the Industry’s Best
“Term Lenders” with Fundera Today!

Find Out If You Qualify

What Will a Term Loan Cost You?

Exactly the right question to ask. Thankfully, the price tag of a term loan is pretty easy to figure out. Let’s take a look at an example.

Example of a Term Loan

Congratulations—you’ve qualified for a term loan!

Let’s say you’re borrowing $25,000 from a lender at a 12% interest rate and a 5-year term.

Given the longer length of that traditional term loan, you’ll most likely have a monthly payment of about $556. (Term loans can come with weekly payments, too.)

That’s a predictable expense you can easily understand and plan your financials around.

Breaking Down Each Term Loan Payment

But here’s the thing: not every payment goes toward the same thing.

Traditional term loans amortize, which means you don’t pay equal parts interest and principal (or the amount you borrowed) from month to month. Instead, lenders usually stack interest payments early on and leave your principal payments for later.

That way, even if you pay off your loan early and get the rest of the interest forgiven, you’ve still paid most of it to the lender.

In other words…

You might save less than you’d think by paying your term loan off before it’s due.

However, your monthly payment is still the same amount—it’s just the proportion of interest to principal that changes.

In order to understand your loan completely, make sure to ask your lender for an amortization schedule.

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