A business term loan is a financing option where a lender provides a lump sum of capital upfront, which the borrower repays with interest over a set period (the "term") via regular installments. Ideal for large, one-off investments like equipment, renovations, or expansion, these loans usually feature lower interest rates and longer repayment schedules (2-10 years) compared to short-term financing. 

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Key Aspects of Business Term Loans

• Types:

  • Short-term: Generally 6 to 18 months.

  • Long-term: Typically 2 to 10 years or more.

  • Secured vs. Unsecured: Secured loans require collateral (like equipment or real estate) but offer lower rates; unsecured loans do not require collateral but often have higher interest rates.

• Eligibility: Generally, lenders look for at least 6 months to 2 years in business, a solid annual revenue (often $50,000–$250,000+), and decent credit scores.

• Benefits: Predictable payments for cash flow management, lower cost of capital compared to merchant cash advances (MCAs), and ability to secure large amounts of capital. 

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• Repayment Structure: Fixed or variable interest rates with regular payments, typically monthly, over a fixed term.

• Uses: Commonly used for purchasing equipment, expansion, financing, covering operational gaps, or acquisitions

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Compared to a business line of credit, a term loan provides all funds at once rather than allowing you to draw down funds as needed.