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What it is
A business term loan delivers a set amount upfront and repays with scheduled principal and interest over months or years. Banks, non-bank lenders, and SBA participating lenders each underwrite cash flow, collateral, and use of funds differently than a line of credit or equipment note tied to one asset.
Who it fits
- An owner buying out a partner or acquiring a complementary business.
- A shop financing build-out or working capital with a defined payoff schedule.
- A borrower refinancing higher-cost debt into one amortizing payment after partner review.
What underwriters typically review
- Operating history and business financial statements lenders can reconcile to tax returns.
- Personal guarantee is common on smaller business credits; SBA programs require guarantees from 20%+ owners per SBA SOP 50 10.
- Documented ability to cover debt service from ongoing revenue — lenders may model coverage ratios using your files.
Pros
- Predictable monthly payments when the rate is fixed.
- Can fund broader uses than single-asset equipment paper.
Cons
- Unsecured or general-purpose term paper may cost more than collateralized loans.
- Prepayment terms vary — ask about fees before you sign.
Questions to ask any provider
- Is this a conventional term loan or an SBA-guaranteed structure?
- What all-in rate and fees apply, and how is debt service calculated in underwriting?
Compare other options
Related guides, calculators, and financing paths — pick what matches your timing and collateral.
FAQ
- How is a term loan different from working capital?
- A term loan is one lump sum repaid on a set schedule; working capital funding is usually shorter and tied to day-to-day costs. Use the DSCR calculator to model a proposed payment before you inquire.