Term Loan
A lump-sum loan repaid in fixed installments over a defined period.
A term loan provides a one-time lump sum of capital that is repaid in structured, predictable installments (typically monthly) over a set period ranging from 1 to 10 years. It is best suited for planned investments with a clear return: expanding a facility, launching a new product line, acquiring a competitor, or refinancing high-interest debt. Because the payment schedule is fixed, businesses can plan budgets with certainty. Short-term loans (under 2 years) carry higher monthly payments but less total interest, while long-term loans spread payments out for improved monthly cash flow. Amounts commonly range from $25,000 to $5 million depending on the lender, credit profile, and time in business.
Example
A restaurant owner wants to open a second location and needs $200,000 for renovations, equipment, and working capital. She secures a 5-year term loan at 9% APR. Her fixed monthly payment is approximately $4,150. With projected revenue from the new location covering this comfortably, she opens on schedule with no equity given up.
