What a Business Term Loan Is
A business term loan is classic financing: you receive a lump sum and repay it over a set term with scheduled payments. It’s simple, predictable, and (when priced well) one of the easiest products to plan around.
At Business Loan Guides, we like term loans when the funding need is clear and you don’t want the “revolving temptation” of drawing more.
How Term Loans Work
- Borrow a lump sum based on your revenue, credit, and time in business.
- Fixed repayment schedule (monthly is common; some products use weekly).
- Term length can vary (short, medium, or longer terms depending on lender).
Common Uses
- Expansion, remodel, or hiring push.
- Large purchases not covered by equipment-specific programs.
- Refinancing expensive debt into a clearer payment plan.
Typical Requirements
- Consistent deposits and verifiable revenue.
- Reasonable credit profile (requirements vary).
- Basic documentation: bank statements, entity docs, sometimes tax returns.
Term Loan vs Line of Credit
If you need ongoing flexibility, compare with a business line of credit. If your need is a defined one-time cost, term loans can be cleaner and less stressful.
Pros and Cons
Pros
- Predictable payments and payoff timeline.
- Often easier to budget than daily-repayment products.
- Can be used for many business purposes.
Cons
- You pay interest on the full amount (even if you don’t “need” it all at once).
- Some loans include origination fees or prepayment rules.
Quick “Smart Borrowing” Rule
If the monthly payment forces you to “hope for a miracle” to make payroll, it’s too tight. Borrowing should create breathing room—not new panic.
Note: Educational content only—not financial advice.
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