Term business loans represent a conventional method of debt financing, entailing regular payments (typically monthly) structured with a predetermined maturity and amortization schedule, ranging from six months to thirty years based on intended use. These loans cater to small and medium-sized enterprises, spanning from a few thousand dollars to over $5,000,000 for loans backed by the Small Business Administration (SBA) and even larger amounts for traditional facilities. Repayments for most term loans are typically monthly, although certain alternative lenders may opt for weekly or daily payback schedules.

The characteristics of term loans, including size, terms, and purposes, vary across commercial lending institutions. While banks may have stringent underwriting criteria, mid-prime lenders specializing in replacing high-interest merchant cash advances may follow different standards. Generally, term loans require collateralization with the borrowing company’s assets, such as real estate, equipment, accounts receivable, or cash flow. A common practice involves placing a blanket lien on all company assets when granting a term loan.

Acquiring a term loan from a conventional bank, private investment firm, or SBA-preferred lender typically necessitates extensive submission of business and personal financial documentation for thorough underwriting. Traditional commercial lenders often demand evidence of an acceptable debt-service-coverage ratio to ensure repayment feasibility and mitigate lender risk.