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TIME TO FUND
With a predictable payment schedule, lower interest rates, and flexible financing options, term loans offer several benefits that can help you grow your business. You’ll be able to plan your finances more effectively, make more accurate projections, and budget accordingly.
While term loans can be a great boost for your business, the eligibility requirements can be a bit strict. Lenders typically expect a solid credit score and a proven business track record. Even with a lower credit score, don’t fret – options like a business cash advance or invoice factoring could still help you secure that much-needed business loan.
Term loans give small businesses quick access to capital to cover a variety of costs and invest in their future.
You can use your loan to:
Fund a business acquisition
Purchase or upgrade equipment and software
Hire new employees
Cover payroll gaps
Remodel your property
Lendio carefully selects the lenders it works with, then works with you to find the best term loan for your unique situation.
If your business doesn’t match some of the qualifiers below, it may be more challenging to receive funding from our lending partners.
TIME IN BUSINESS
Lendio’s mobile app can help get your business ready for financing. Open a business bank account, get cash flow insights and stay connected to get updated when you have offers available.
Sure, you can go the bank route with a long application process and 75% rejection rate. But if you’re looking for financing in this lifetime, Lendio offers a faster, easier application process.
It’s secured with bank-grade encryption and SSL technology, so you know your information is safe.
We pair you with loan options from our network of 75+ lenders. Our dedicated funding managers can help you weigh the pros and cons of each option.
Once you’re approved, you’ll be able to access your capital in as little as 24 hours.
funded through us
lenders in our network
Sterling HannemannCo-Owner of Seven Brothers
Chloria ChandlerOwner of Bobbee O’s BBQ
A term loan provides a borrower with a lump sum of money upfront that is then repaid at regular intervals over a set amount of time, also referred to as the loan term. Interest rates on term loans can be fixed or floating.
One of the best things about a term loan is that it can be used for a variety of funding needs. Here are some examples of how you can use your term loan:
You can use a small business term loan to cover a payroll gap you’ve got to cover. You might have one because your business is seasonal. Or you might have one because you had a rush of business and had to bring on new employees to help cover it all. Either way, you can use a term loan to pay.
Adding another business location
If you’ve got one brick-and-mortar business location that’s thriving, the opportunity to open another might be too good to pass up. You could use a term loan to help you cover the startup costs of your new location. Renovations, rent, and materials for running your business all cost money a term loan could help provide.
Word-of-mouth advertising is great, but it only gets your business so far. You likely need to market your business at times and term loan funding can help you do that.
Acquiring another business
Another way term loans could help your business is if you’ve got the chance to acquire another business. If there’s one that comes on the market and would be the perfect addition to your existing business, don’t miss out. You can use a term loan to help acquire it.
The interest rates for term loans tend to be lower than other kinds of quick financing. The exact rate will vary by lender and the loan terms. Don’t forget to add any origination fees or application fees to the total cost of the loan.
Term loans are best used for one-off expenses like investing in equipment, real estate, or working capital. Because term loans can be approved relatively quickly, they are a great way for businesses to fund essential projects or expansions to grow their business long-term. If you need money for a big project with solid ROI potential, a term loan can be a good option.
Well-established businesses with a solid history of strong financials and healthy revenue are a good match for term loans. Lenders are looking for borrowers that can demonstrate reliable income and repayment through strong credit and financial history.
Newer businesses or startups with less than two years in business are unlikely to be a good match for term loans—they simply don’t have the financial history yet to prove they are a safe bet for lenders.
Term loans have advantages and drawbacks—which loan is right for you will depend on your own business goals and how well you meet eligibility criteria. Weigh the pros and cons carefully to understand if a term loan is right for you.
Predictable payment schedule
Term loans are lump sum funds with a set repayment schedule, which means you’ll always know when payments are due and how much is owed. This predictability makes it easier to plan your finances, make more accurate projections, and budget accordingly.
Lower interest rates
Long-term loans typically have lower interest rates compared to other financing options, making them a more affordable option for businesses. Additionally, because the loan is spread across a longer time period, the monthly payments will generally be lower, resulting in less impact on cash flow from month to month. Plus, interest on term loans is tax deductible, putting more savings into your pocket.
Versatile short- or long-term financing options
Term loans offer flexible financing options for businesses, from short-term funding up to 18 months to longer terms anywhere from a few years to a decade or more.
Inflexible payment schedule
The predictability of term loan payments can also be a disadvantage. Term loans have fixed repayment schedules and often have strict policies on early repayment. This means you must pay on time every month with little to no exception. And short term loans may have more frequent repayment deadlines with weekly or even daily payments. This can put a strain on a business if its cash flow is unpredictable.
Strict eligibility requirements
Because term loans typically deal with significant sums of money, lenders have stringent eligibility criteria. Borrowers should have an established business with strong finances, and a good credit score.
Be prepared to share:
New businesses don’t have a long-established financial history to demonstrate secure cash flow and practices, so they are less likely to get approved.
Term loans are generally classified into short-term loans and long-term loans.
These short-term loans have a fairly self-explanatory name. They’re short-term, generally meaning they are repaid over 18 months or fewer.
These are like short-term loans but with a longer repayment period, usually between one to five years. They’re great if you need a bit more cash and more time to pay it back.
These are the big ones! They’re for larger amounts and have terms that can last anywhere from five to twenty-five years. They’re perfect for big investments like buying a new building or launching a new product line.
Business term loans work pretty much like a standard loan you might take out for personal reasons. Let’s say you’re approved for a loan – you’d get a lump sum of cash upfront. Then, you’d pay it back over a set period of time, or “term,” with interest.
The great part? You can use this loan for just about any business expense you’ve got. Need to buy equipment? Absolutely. Looking to expand your operations? Go for it. It’s all about helping you grow your business.
Remember, we’re here to help you through every step of the process. You’re not alone in this journey, and together, we’ll find the best solution for your business.
*The information contained in this page is Lendio’s opinion based on Lendio’s research, methodology, evaluation, and other factors. The information provided is accurate at the time of the initial publishing of the page (November 28, 2022). While Lendio strives to maintain this information to ensure that it is up to date, this information may be different than what you see in other contexts, including when visiting the financial information, a different service provider, or a specific product’s site. All information provided in this page is presented to you without warranty. When evaluating offers, please review the financial institution’s terms and conditions, relevant policies, contractual agreements and other applicable information. Please note that the ranges provided here are not pre-qualified offers and may be greater or less than the ranges provided based on information contained in your business financing application. Lendio may receive compensation from the financial institutions evaluated on this page in the event that you receive business financing through that financial institution.
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