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Frequently Asked Questions About Term Loans for Businesses


Business owners have various options when they need to secure funding, and term loans for businesses are a practical solution in many instances. Of course, every company and every situation is unique. That’s why it’s always important to do some research and get advice from a qualified source before pursuing any particular type of funding.

If you’re looking for an infusion of funds, here’s some information to help you determine whether a business term loan might be the way to go.

What Are Term Loans for Businesses?

Business term loans are relatively straightforward loans that are granted in full upfront by the lender. They’re specifically offered to businesses, but are basically the same as other familiar term loans like car loans, mortgages, student loans, and many personal loans. The funds are usually made available in a few days to one week.

The loan is repaid, along with interest, in fixed monthly payments over an agreed-on period of time. Typically, short-term business loans are repaid over one to five years, and long-term business loans are repaid over five to 10 years.

How Are the Terms of a Business Term Loan Set?

Not all business term loans are the same, obviously. Loan amounts generally range anywhere from a few thousand dollars to several million. Your company’s revenue, length of time in operation, and your personal and/or business credit score are key factors in determining how much a lender is willing to offer and what the interest rate will be. The annual percentage rating (APR) usually starts around 6% and reaches up to 99%.

What Are Term Loans for Businesses Used for?

The funds acquired in a business term loan are most often applied to significant immediate expenses. These would be costs like equipment upgrades and purchases, a large inventory order, office renovations or expansions, new hires and associated payroll obligations, and business expansions.

Who Are Business Term Loans Good for?

These loans are primarily for businesses that have been profitably operating for at least several years. Repayment begins right away, so if you need more flexibility in this regard, another option like a business line of credit may be more appropriate. Also keep in mind that collateral may be required for a business term loan.

Who Offers Term Loans for Businesses?

Banks and credit unions are the traditional lenders. They typically offer lower interest rates but have more strict qualification requirements than online lenders—the other option. Online lenders may offer more convenience and flexibility, such as even smaller or shorter-term loans. Application processes vary between lenders.


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