WHAT IS A BUSINESS TERM LOAN?

A business term loan is what most small business owners think of when they hear the words “small business loan.” The repayment terms and fee structure are straightforward. Borrowers receive this money and agree to pay it back in regularly scheduled payments over a set period. The period is known as a loan term. In most cases, you make fixed monthly payments for a set repayment term.

In addition to the loan amount, known as the principal, borrowers agree to pay interest, which is the fee lenders charge for borrowing that money. The principal loan amount and the interest/factor rate determines the amount of your payments. This rate also determines the total amount you’ll be paying back over the loan term.

Business term loans can come with fixed or variable rates. A fixed interest rate means lenders won’t change the rate during the term, while variable rates change with the WSJ Prime Rate in most cases. Many small business owners prefer the stability of fixed interest rate business loans.