Business term loans
A term loan is the structure most people picture when they think of business financing: a fixed amount, repaid on a set schedule, over a defined period of time.
What it is
A business term loan provides a single lump sum that you repay over a defined term — commonly with monthly payments, though some providers collect weekly or daily. Each payment typically covers both principal and the cost of borrowing.
The cost may be expressed as an interest rate or, with some providers, as a factor rate or a fixed total repayment. How the cost is expressed changes how you should compare it — a factor rate is not an interest rate, and the two are not directly comparable without doing the math.
When businesses typically consider it
Businesses typically consider a term loan for a larger, one-time expense: an expansion, a renovation, a major purchase, or refinancing existing business debt into a different payment structure.
Because the amount and schedule are fixed, a term loan fits needs with a clear price tag. It is a less natural fit for ongoing, unpredictable expenses — that is what lines of credit are designed for.
Tradeoffs
- Predictability vs. flexibility: A fixed schedule makes the payment easy to plan around, but you pay interest or cost on the full amount from day one — even the part you have not spent yet.
- Term length vs. payment size: A longer term usually means a smaller payment but a higher total cost. A shorter term reverses that. Compare total repayment, not just the monthly figure.
- Fixed cost vs. early payoff: Some agreements reduce the remaining cost if you pay off early; others — especially fixed-total-repayment structures — charge the full amount regardless. Ask before you sign, not after.
What to compare
- Total repayment over the full term, not just the periodic payment
- How the cost is expressed — interest rate, factor rate, or fixed total
- All fees: origination, closing, servicing, and anything deducted from the amount you receive
- Payment frequency — monthly, weekly, or daily — and how it interacts with your cash flow
- Prepayment terms: whether paying early reduces your cost
- What secures the financing: collateral, a personal guarantee, or a UCC filing
What this page cannot know
- What any provider will offer your business, or on what terms
- Whether a term loan is the right structure for your situation
- How a specific offer's pricing compares to the rest of the market
- Anything about your business you have not entered into one of our tools
Run your own numbers
Start with the numbers, not a lender. The tools are free, and nothing you enter leaves your browser.