What is a Business Term Loan?

Navigating the plethora of business financing options can be overwhelming, but business term loans are emerging as a popular choice. Unlike the term itself, a business term loan isn’t just about the length of time; it’s a financing option with unique features.

Understanding Loan Terms

Every business loan comes with a term, signifying the period for repayment and typically tied to the amortization period or fixed interest rate duration. Amortization is the time given to pay off the total borrowed amount, encompassing origination fees, closing costs, and interest. Business term loans, often associated with online lenders and SBA lenders, typically have shorter terms, usually up to 12 years and sometimes as short as three months. The interest rate usually aligns with the amortization period.

Not a Merchant Cash Advance

In recent years, the term “business term loan” has gained traction, aiming to differentiate from merchant cash advance (MCA) providers. While business term loans may share some attributes with MCAs, the critical distinction lies in their fundamental nature.

Business Term Loans:

  • Involve principal and interest.
  • Follow a set loan amortization schedule.
  • Not a pre-purchase of future revenue.
  • Offer fixed interest rates for the loan term.

Merchant Cash Advances:

While business term loans may appear similar to MCAs, they are often more cost-effective. For instance, an MCA even with a moderate factor rate could translate to an annual interest rate exceeding 100%. In contrast, business term loan lenders offer competitively priced annual interest rates.

Benefits of Business Term Loans

Business term loans provide various benefits, combining affordability with flexibility:

  • Quick access to funds, sometimes within one day.
  • Short online application with minimal paperwork.
  • Fixed interest rates for the entire term.
  • Accessibility for lower credit scores.
  • Loan amounts ranging from $1,000 to $500,000 or more.
  • Rates comparable to SBA financing in some cases.
  • Opportunity to build personal and business credit.

Moreover, business term loans are accessible to most business owners, often requiring minimal documentation and proving suitable for diverse business purposes. Term lenders are generally forgiving of lower credit scores and shorter operational histories, sometimes providing incentives for repeat borrowers.


Business term loans present an affordable and flexible avenue for accessing capital promptly. Whether you have an impeccable credit score or less-than-perfect credit, this financing option allows you to capitalize on swift funding without compromising on cost-effectiveness. The fixed rate and predictable repayment schedule of many terms loans offer peace of mind, making business term loans a strategic choice for businesses seeking financial agility in an evolving market.

Interested in accessing a fast and affordable business term loan? Contact our recommended lenders BHG Capital, OnDeck, or SmartBiz.

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