Term Loan

A Term loan is a loan from a bank for a specific amount that has a specified repayment schedule and a fixed or floating interest rate. For example, many banks have Term-loan programs that can offer small businesses the cash they need to operate from month to month. Often, a small business uses the cash from a Term loan to purchase fixed assets such as equipment for its production process.

A Term loan can be used for equipment, real estate or working capital paid off between one and 25 years. The loan carries a fixed or variable interest rate, monthly or quarterly repayment schedule and a set maturity date. The loan requires collateral and a rigorous approval process to reduce the risk of default. A Term loan is appropriate for an established small business with sound financial statements and a substantial down payment to minimize payment amounts and total loan cost