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Business Term Loan: How It Works and Who It's For

A business term loan provides a lump sum of capital you repay with interest over a fixed period. It's one of the most widely available forms of business financing, ranging from short-term online products to multi-year conventional bank loans.

Fundember Editorial · Reviewed August 2026 · Methodology

Typical range
$10K–$2M+
Rate type
Fixed or variable
Term length
1–10 years
Funding speed
1 day–4 weeks

What is a business term loan?

Unlike a line of credit (which you draw from and repay repeatedly), a term loan gives you a fixed sum upfront that you repay in regular installments over an agreed period. Term loans are predictable — you know exactly what you owe and when.

They range from short-term working capital loans (6–18 months, often from online lenders) to long-term conventional bank loans (3–10 years). SBA 7(a) loans are technically a form of term loan with government backing.

Typical eligibility

Varies widely by lender.

6 months to 2+ years in business
Minimum annual revenue ($50K–$250K+ depending on lender)
Personal credit typically 600+ (higher for bank loans)
Personal guarantee usually required
Some lenders offer a soft credit check for prequalification

Best use cases

  • One-time investments (equipment, renovation)
  • Business acquisition
  • Debt consolidation
  • Large inventory purchase
  • Hiring expansion
  • Marketing campaigns

Potential advantages

Predictable fixed payments
Can fund faster than SBA (sometimes 1–3 days)
Wide range of lenders
No equity dilution

Considerations

Higher rates than SBA for shorter-term products
Fixed repayment even if revenue dips
May require collateral for larger amounts
Early repayment penalties on some products

Related

Does a term loan fit this need?

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