Term Loan

A Term Loan Is A Monetary Loan That Is Repaid in Regular Payments Over A Set Period of Time. Term Loans Usually Last Between One and Ten Years, But May Last as Long As 30 Years in Some Cases. A Term Loan Usually Involves an Unfixed (A. K. A. Floating) Interest Rate That Will Add Additional Balance to Be Repaid. The Floating Interest Rate Is Often Based on The Borrower’s Credit Rating And/or Its Consolidated Leverage Ratio and Often Has A Base of LIBOR or A Similar Benchmark Rate.

Term Loans Can Be Given on An Individual Basis, But Are Often Used for Small Business Loans. The Ability to Repay Over A Long Period of Time Is Attractive for New or Expanding Enterprises, As the Assumption Is That They Will Increase Their Profit Over Time. Term Loans Are A Good Way of Quickly Increasing Capital in Order to Raise A Business’ Supply Capabilities or Range. For Instance, Some New Companies May Use A Term Loan to Buy Company Vehicles or Rent More Space for Their Operations.

Types of Term Loans

If You Decide You Want A Term Loan, You Can Apply for A Short-Term, Intermediate-Term or Long-Term Loan.

Short-Term Loans

These Are Loans You Can Take Out for Smaller Amounts, With Shorter Repayment Periods – Generally One or Two Years. Short-Term Loans Are Good for Day-To-Day Working Capital Expenses. However, Since These Loans Are More Convenient and Easier to Apply For, You Can Expect to Pay Higher Rates.

Intermediate-Term Loans

Intermediate-Term Loans Are the Happy Medium Between Short- And Long-Term Loans. The Repayment Terms Are Typically Two to Five Years, And You Can Access Up To $500,000.

These Loans Are A Good Option for Businesses Looking to Open A New Location or Hire More People. This Type of Funding Can Help You Expand Your Business Operations and Begin Generating More Revenue.

Long-Term Loans

Long-Term Loans Offer the Highest Amounts and The Longest Repayment Terms. You Can Access Millions of Dollars in Funding, And the Repayment Terms Can Be Up To 25 Years.

A Long-Term Loan Is A Good Option for An Established Business with Excellent Credit and A Solid Financial Record. You May Consider One to Fund Long-Term Growth Strategies for Your Business.

Frequently Asked Questions

Get the Answers you Need to Common Questions About Term Loan. Everything you need to know about Term Loan and How your Business can Qualify.

What is a term loan?

The lender provides the funds, and you repay the loan with interest over a period of months or years. The interest rate can be fixed or variable and tends to be lower than the rates for other types of financing. Term loans can be used for both personal and business expenses. Many business owners apply for a term loan to fund a one-time project or as a means to achieve long-term business growth.

How do term loans work?

You apply for a term loan through a bank, credit union or online lender

What are the 3 types of term loan?

There are three main classifications found in Term Loans: short-term term loans, intermediate-term loans, and long-term term loans.

How do you explain a term loan?

A term loan provides borrowers with a lump sum of cash upfront in exchange for specific borrowing terms. Borrowers agree to pay their lenders a fixed amount over a certain repayment schedule with either a fixed or floating interest rate.

What is the time period for a term loan to?

The loan tenure can range from 1 year to 3 years to 10 years. The tenure may be extended on a case-to-case basis for up to 30 years. Also, shorter-term credits can be extended for companies that need funds but do not qualify for longer-term credit. Term loans are extended for both green field and brown field projects.