Term Loans: What Are They and Are They Right For You?

By: TXRB Staff | 22 Sep 2022

Term Loans

What does it mean for a business to “Grow at the speed of cash”? Simply put, unless you have the cash flow for that new expansion or necessary equipment, you are out of luck. Luckily, there are many options for business owners to finance business expenses. Term loans, lines of credit, SBA loans, equipment financing, and more! An attractive option for many business owners is a term loan. So, what is a term loan?


A term loan is a loan that provides a certain amount of money upfront, typically accompanied by a payment plan for a set number of payment installments, fixed or floating rates, and potentially some collateral or balloon payment at the end of the loan. Term loans are ideal for business owners wanting to invest in cash-generating assets to grow their businesses. These loans normally last longer than a year but term length varies. 

Is a Term Loan Right for You?

There are many loan options for small business owners. Term loans, like all other loans, have their pros and cons.

Pros of Term Loans:

  1. You don’t have to let growth opportunities pass by. Term loans are an excellent way to grow your business and capitalize on new opportunities.
  2. Build business credit. Building your small business credit can give you even more financing options down the road.
  3. Reasonable rates and flexible terms. Term loans typically have more flexibility and have more reasonable rates than other loan options. This is especially ideal for business owners that don’t want to tie up cashflow month-to-month during the life of the loan.

Cons of Term Loans:

  1. Not everyone can qualify. To see if you can qualify, it’s best to talk to us directly. Not all businesses can qualify for a term loan.
  2. Collateral may be required. Be prepared to use some of your existing assets as collateral for the life of the loan.

Lengths and Types of Term Loans

If you have decided that a term loan is right for your business, you should know that there are several different types of term loans to be aware of.

Short-term Loans

Lasting one to two years on average, these loans are usually for a smaller amount with fewer payments total and typically a shorter qualification period. Great for daily operating expenses. Because short-term loans are easier to qualify for, they may have higher rates than their long-term counterparts.

Intermediate-term Loans

Lasting two to five years on average, intermediate-term loans are a good option for a business expansion. Intermediate-term loans can be up to $500,000.

Long-term Loans

As the name would imply, these loans have the longest repayment terms, lasting up to 25 years.  The amortization, or term of the loan, can be five-plus years based on underwriting and the purpose of the need. This type of term loan is a good option for established businesses with excellent credit.

Key Takeaways

Term loans have flexible terms and many options for businesses needing financing. It isn’t, however, the only loan option for businesses. Is a term loan right for your business? The simplest way to find out, come and talk to one of our experienced professionals!

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