What is a business term loan?

A business term loan provides a lump sum of capital that is repaid over a set period (the term) with regular scheduled payments of principal and interest. Short-term loans run up to 18 months, medium-term loans 2–5 years, and long-term loans 5–25 years. Interest rates can be fixed or variable and depend on creditworthiness, loan size, and term length. Term loans are best for specific, one-time investments like purchasing equipment, expanding operations, or acquiring another business. Traditional bank term loans have the lowest rates but strictest requirements; online lenders offer faster approval but at higher costs.