Every growing business faces the same challenge — how to fund new opportunities without draining cash reserves. From hiring new staff to purchasing equipment, expansion takes money. A term loan is one of the most reliable funding tools U.S. businesses can use to cover these costs. In this guide, we’ll walk you through how term loans work, their benefits and drawbacks, application tips, and everything you need to know to decide if it’s the right choice for your business.
What Is a Term Loan?
A term loan is a traditional form of business financing where you borrow a lump sum upfront and repay it over a fixed period in regular installments. These installments typically include both principal and interest. Term loans are offered by banks, credit unions, and online lenders, and can be tailored to short, medium, or long repayment schedules.
Unlike revolving credit (such as a business line of credit), a term loan provides a one-time cash injection that is best for large, one-off expenses or long-term investments. Loan terms can range from 6 months to 25 years depending on the loan size and lender requirements.