A term loan is a one-time sum of cash you pay back, plus interest payments, over a predetermined period of time.
This is the most common kind of business loan out there, so you probably already understand the structure. You borrow a lump sum all at once, typically for a specific purchase, then repay it at a fixed interest rate over time. The loan amount, term length, interest rate, and repayment schedule can all vary depending on your business financials and the lender youâre working with.
Term loans are extremely predictable, making them easy to plan for. Youâll know the amount of money, the interest rate, the payback period, and the payment schedule before taking out your loan.
Term loans come in all shapes and sizes, and what you qualify for depends on your small businessâs needs, credit, revenue, cash flow, and other financials. Term loans can range from 1 year to 5 years, with daily, weekly, and monthly payments.
Loan amounts and interest rates also change with your businessâs history and needs. The term loan is a broad financing category, available from traditional banks and alternative lenders alike.