What Is a Business Term Loan?

What a Business Term Loan Is

A business term loan is a lump sum of capital you repay over a fixed period with a fixed schedule. You get the full amount up front. You pay it back in regular installments, usually monthly, over a term that can run anywhere from one year to ten or more.

The structure is simple on purpose. You know the amount, the rate, the payment, and the payoff date on day one. That predictability is the whole point. Unlike a line of credit you draw on as needed, a term loan is a one-time injection of capital for a specific purpose.

How a Business Term Loan Works

You borrow a principal amount. The lender sets an interest rate and a term length. Your payment is calculated so the loan fully amortizes, meaning each payment covers interest plus a slice of principal until the balance hits zero on the final payment.

Here is a concrete example. You borrow $150,000 at 11% APR over five years. Your monthly payment lands around $3,261. Over the full term you repay roughly $195,700, of which about $45,700 is interest. The payment never changes, so you can budget around it from month one.

Rates can be fixed or variable. Fixed rates lock your payment for the life of the loan. Variable rates move with a benchmark like the Prime rate, so your payment can rise or fall over time. Terms are shorter for working capital and longer for hard assets like real estate or heavy equipment. Some short-term online loans run only 3 to 18 months and carry higher costs in exchange for speed.

What You Can Use a Business Term Loan For

Term loans fit projects with a clear price tag and a clear payoff. Common uses include:

Opening a second location or funding a buildout

Buying out a partner or acquiring another business

Purchasing equipment or vehicles when you want to own them outright

Consolidating higher-cost debt into one predictable payment

Funding a large inventory buy ahead of a busy season

Bridging a gap before a known revenue event

If the expense is a one-time, sizable investment that will generate returns over years, a term loan usually fits. If you need flexible, revolving access to cash, a line of credit may serve you better.

Requirements and How to Qualify

Lenders weigh a few core factors. Honest ranges:

Time in business: Banks typically want two or more years. Online lenders may approve businesses with 6 to 12 months of history, often at higher rates.

Revenue: Expect a minimum annual revenue floor, commonly $100,000 to $250,000, though this varies widely by lender and loan size.

Credit: A personal credit score in the high 600s and up opens the most doors and the best pricing. Some online lenders go lower, again at a cost.

Collateral: Larger or longer loans may require collateral or a personal guarantee. Smaller, shorter loans are often unsecured.

Typical documents include 3 to 6 months of business bank statements, 1 to 2 years of business tax returns, a profit and loss statement and balance sheet when applicable, government ID, business entity documents, and a voided business check.

What a Business Term Loan Costs: Rates, Terms, and Fees

Pricing splits along two tracks, based on June 2026 figures. Rates move, so treat these as current ranges, not quotes.

Bank term loans: Roughly 7% to 12% APR for well-qualified borrowers. You get the best pricing here, but banks are slower and stricter, and longer terms.

Online term loans: Roughly 10% to 36%+ APR, often clustering between 18% and 45% for average-risk borrowers. You trade higher cost for speed and looser requirements.

For reference, the U.S. Prime rate sits at 6.75% as of June 2026, steady since December 2025. Variable-rate loans price off benchmarks like this, so your rate reflects both the benchmark and your risk profile.

Watch for origination fees, which commonly run a few percent of the loan amount and may be deducted from your proceeds. A loan with a slightly higher rate but no origination fee can cost less overall, so compare total cost, not just the headline rate.

Pros and Cons

Predictable, fixed payments make budgeting clean

Lower cost than most short-term or revenue-based options

Large amounts available for serious projects

Building a strong repayment history can improve future terms

Funding is slower than revenue-based products, especially through banks

Stronger credit and revenue requirements than fast-cash options

A lump sum means you pay interest on the full amount even if you deploy it gradually

Early payoff may carry a prepayment penalty with some lenders

Who a Business Term Loan is Best for (and Who Should Look Elsewhere)

A term loan is a strong fit if you have a specific, sizable project, at least a year or two of operating history, steady revenue, and decent credit. It rewards businesses that can plan around a fixed payment and want the lowest reasonable cost of capital.

Look elsewhere if you need cash within days and cannot wait for underwriting, if your revenue is highly seasonal and a fixed payment would strain slow months, or if you want flexible access to funds rather than a single lump sum. In those cases a line of credit or a revenue-based product may fit better.

How to Get a Business Term Loan Through Quordx

Quordx Capital is a funding brokerage, not a lender. That means we are not trying to sell you one product. You apply online in about 10 minutes, and Quordx Capital reads your profile and matches you to 3 to 7 best-fit lenders from a network of 50+ vetted lenders. Quordx Capital submits your package on your behalf, so you are not filling out the same application five times.

It is free to you, always. No application fee, no broker fee, no processing fee. Quordx Capital is paid a commission by the lender, never by you. Lender decisions typically come back in 24 to 48 hours, and funding can land in as little as 3 to 7 business days. Quordx Capital serves SMBs in 46 states.

Frequently Asked Questions