As mentioned briefly above, business term loans are likely what you think of when it comes to commercial (or even personal) financing. With a term loan, a small business lender gives you access to a lump sum of capital—which you then pay back, with interest and fees, over a set period of time.
Although your payment schedule will vary based on the type of business term loan and the lender you’re working with, you’ll make equal payments over the course of your loan term.
This being said, business term loans can be issued by banks, credit unions, and online lenders. In general, banks and credit unions will offer the most ideal rates and terms, but will also require top qualifications and will be slower to fund. Online lenders, on the other hand, will offer greater flexibility and faster funding times, but will likely be more expensive and have shorter terms.
Overall, in addition to a predictable payment schedule, one of the benefits of business term loans is that they can be used for a variety of business financing purposes. Therefore, with medium- and long-term loans (vs. short-term loans), you’ll find that these loans are often used for:
- Purchasing equipment or inventory
- Working capital
- Refinancing other business debts
- Hiring staff
- Meeting payroll or tax obligations
- Financing business expansions
- Purchasing real estate
- Funding general long-term investments