Business term loan

A business term loan gives you a single lump sum up front that you pay back on a fixed schedule, often monthly, over a term that commonly runs from one to five years and sometimes longer for larger amounts. Each payment covers part of the principal plus interest, so the balance shrinks over time through amortization. Rates can be fixed or variable, and lenders set the amount, term, and price based on your annual revenue, time in business, cash flow, and business credit score. Most term loans carry a personal guarantee, and larger ones may require collateral such as equipment or real estate.

Term loans fit one time investments with a clear payoff, like a renovation, a hiring push, or buying out a partner, where you want a predictable payment you can plan around. The trade off is that you take the full amount at once and pay interest on all of it, even if you spend it slowly, so a line of credit may suit ongoing or uneven needs better. Stronger credit, longer time in business, and steady revenue lower your rate and raise the amount you qualify for. Watch for origination fees and any prepayment penalty before you sign.