Term Loan

It depends on the type of loan and lender. Short-term loans typically last from 3 to 18 months, medium-term loans between 1 to 5 years, and long-term loans potentially stretching from 10 to 25 years or more.

Short-term business loans provide a fast infusion of cash, designed to be repaid quickly, often within 3 to 18 months. Businesses use these loans for immediate needs like covering payroll, inventory purchases, or addressing seasonal fluctuations, and lenders usually set higher interest rates and weekly or even daily repayment schedules to reflect the short duration.

Examples of term loans include equipment financing, which allows businesses to purchase necessary machinery or technology and pay for it over time, commercial real estate loans to fund property purchases or renovations, and working capital loans aimed at helping businesses meet their day-to-day operational expenses. Each loan provides a specific solution to a business's needs, structured with a fixed repayment term and schedule.

Interest rates for term loans can vary widely, ranging from 4% for highly qualified borrowers up to 30% or more for those with lower credit scores or shorter loan terms. The rate often depends on the lender, loan amount, term length, and borrower's financial history; lower rates are typically associated with long-term loans and strong credit, while short-term and higher-risk loans come with higher rates to compensate the lender.

Established businesses with steady revenue and a clear investment plan are best suited for term loans, particularly those needing capital for long-term investments like expanding operations, purchasing large equipment, or securing commercial property. Startups or businesses with irregular cash flow may find shorter-term or more flexible loan options better until they have a more predictable income stream.

Yes, most business term loan applications involve a hard pull on the applicant's personal credit. This helps lenders assess the applicant's creditworthiness and ability to repay. While some lenders may consider business credit, personal credit is a key factor in approval decisions, especially for small businesses and sole proprietors.

Lenders often require collateral for larger-term loans to secure their investment, which could include business assets like inventory, equipment, or real estate. However, some smaller or short-term term loans, particularly those for well-qualified borrowers, may be unsecured, though they typically come with higher interest rates as a trade-off.

Businesses usually need a strong credit score to qualify for a term loan. Consistent revenue and a clear demonstration of financial stability are also required. Lenders may also need a minimum operating history, typically at least one to two years, and financial documents like tax returns, profit and loss statements, and bank statements to assess the business's ability to meet regular repayments.