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Learn More About Business Term Loans

What’s a business term loan?

The term loan is one of the most popular small business loan options. It’s not flashy or fancy—it’s just the straightforward, classic way to finance your business.

The basics: Loan amounts range between $5,000-2,000,000 and terms range between 1-5 years. To qualify for a term loan, you’ll need to have a profitable business that has been established for at least 2 years. And when you apply through Lendio, you can typically gain access to the funds in as little as 24 hours after approval.

Because the term loan is flexible, you can use it for just about any business need. Leverage a term loan to:

  • Expand your business
  • Acquire another business
  • Increase cash flow
  • Purchase equipment
  • Hire staff
  • And more

How your monthly payments are calculated

Your monthly term loan payments are determined by four main factors: loan amount, interest rate, term, and origination fee.

While the loan amount and term should be based on your needs, your interest rate is largely based on your credit history. If you have excellent credit, your interest rate can be as low as 6%. If you have some derogatory marks in your credit history, you can often still qualify for a business term loan but you’ll likely end up with a higher interest rate.

The origination fee on a term loan is typically about 5%, so you’ll want to factor this in when determining the total cost of your loan. Note that you won’t need to pay this fee while shopping around for a loan. Your origination fee will either be due at signing, or baked into the overall cost of your loan.

Easy ways to reduce the cost of your business term loan

The term loan is pretty inexpensive as business financing options go—but your costs can get out of hand if you’re not diligent about making your monthly minimum loan payments.

Avoid late fees and boost your credit score by paying on time, every time. You can easily stay in good standing by calendaring your due dates or setting up automatic payments. If you run into a financial snag and are worried you might miss a payment, contact your lender immediately to see what your options are.

It’s also a smart idea to ask about prepayment penalties. Some lenders will reward you with a discount for paying off your loan early while others will impose additional fees for doing so. Always be sure to review any potential discounts, penalties, and fees associated with your loan before finalizing the paperwork with your lender.

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