Steps to Apply:
1
Quick Application:
Complete our simple online form and receive swift approvals.
2
Explore Choices:
Compare various options to find the ideal solution for your needs.
3
Personalize Your Terms:
​Choose the options that best suit your business objectives.
4
Get Funding:
Access funds within a few business days for most programs.
Get the Best Small Business Loan for a Business Term Loan
At Merchant Pro Funding, we specialize in providing the best business term loan options. Our tailored solutions offer competitive rates and flexible terms to help your business thrive and achieve long-term success.
Need help? Reach out to us:
Email: CS@merchantprofunding.com
Business Term Loans: Fixed Payments For Long Term & Short Term Loans
When people talk about small business loans, they usually refer to Business Term Loans. This is the most traditional and well-known type of small business loan. The small business owner receives a lump sum paid back with interest via fixed monthly payments over a fixed loan term. Despite the inconveniences of this repayment schedule, many companies still prefer it over other financing options. This is because when it comes to growth and significant investments, no product may be as conducive to your cash flow as a business term loan.
In this guide, we will answer the following questions and more:
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. You usually make monthly fixed 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 percentage rate determines the amount of your payments. This percentage also determines the total amount you'll repay over the loan term.
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Business term loans come with fixed interest rates or variable rates. A fixed interest rate means lenders won't change the rate during the term, while variable rates usually change with the WSJ Prime Rate. Many small business owners prefer the stability of fixed interest rate business loans.
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Small business term loans generally carry lower costs and higher borrowing amounts than other small business financing products. However, they are also the hardest to qualify for. SBA Loans (Small Business Administration) are prime examples of long-term loans with challenging qualification requirements.​
Max Funding Amount:
$10K – $5M
Factor Rates:
Starting at 1-4% p/mo
Term:
3 months – 5 years
Speed:
1-3 Business days
All business term loans carry monthly payments, interest rates, and a set term. However, there are many different types of interest systems. Each variation has its pros and cons. Depending on your type, your interest could stay the same or change throughout your term. And though your monthly payment might stay the same, the portion that goes to interest (as opposed to your borrowing amount) could also change.​
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Your type of interest will also determine whether it makes sense to pay the entire loan off before your scheduled due date. Some loans carry prepayment penalties, while others allow you to pay less interest if you pay early.
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Business term loans often make sense for companies ready to invest in large and expensive capital business assets. These are the things that will help your company grow. They could include equipment or inventory. SBA loans or equipment financing are term loans that would be perfect for this scenario.
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Other companies use term loans to provide working capital. Some might use one of these term loans to consolidate higher-interest debt to lower their overall rate and payments by stretching out their debt over a more extended period. Businesses might also apply for a business term loan to help pay off taxes or meet payroll obligations.
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Example of a Business Term Loan:
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Let's say you want business funding to purchase a sizeable one-time inventory order for $100,000. This would let you expand your in-store product offerings to meet your current customer demand and reach new customers. Yet you don't have $100,000 in your bank account.
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So, you apply for a small business loan. You negotiate a five-year term at a fixed interest rate of 8% with monthly repayments. You get the money and buy your inventory now. And the cost of purchasing that inventory gets spread over sixty months – this type of term loan is easier on your cash flow than, say, a merchant cash advance with a factor rate due within six months to one year.
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Business Term Loans – Facts, Research & Reports
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40% of employer firms sought outside funding to support their business in 2022. (Source: 2023 Small Business Credit Survey)
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While 43% of businesses that applied for funding sought a business line of credit, 34% sought a business loan, and 23% sought an SBA loan or line of credit. (Source: 2023 Small Business Credit Survey)
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According to a Joint Federal Reserve Small Business Credit Survey, about 21% of surveyed small businesses that applied for financing and had been operating for under two years didn't get any funding. Only 42% of applicants got the total amount they requested.
How Do Business
Term Loans Work?
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Lower Costs: Term loans are among the cheapest financing options due to their low fixed interest rates and longer terms.
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High Borrowing Amounts: Term loans allow you to borrow more than most other financing products.
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Simple Repayment Structure: Fixed monthly payments make term loans easy to budget for.
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Clear-Cut Requirements: If you meet the criteria, you're more likely to be approved compared to less straightforward loan products.
What Are The Advantages of Business Term Loans?
What Are The Disadvantages of Business Term Loans?
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Strict Credit Requirements: Poor credit history can disqualify you, even with strong revenue.
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Not Ideal for Short-Term Needs: Designed for large, long-term investments, not temporary cash flow issues.
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Prepayment Penalties: Some loans penalize early repayment, increasing total costs.
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Complex Interest Systems: Different lenders may use varied interest structures, complicating comparisons.
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Business Term Loans Compared To Other Product
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Loan Types
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Max Amounts
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Rates
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Speed​
Merchant Cash
Advances
$7.5K - $1M
​Starting at 1-6% p/mo
1-2 business days
Receivables/Invoice Financing
$10K - $10M
Starting at 1% p/mo
1-2 week
SBA Loan
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$50K - $5.5M
Starting at Prime + 2.75%
8-12 weeks
Equipment
Financing
Up to $5M per piece Starting at 3.5% (SBA)
3-10+ business days
Business
Term Loan:
$10K - $5M
Starting at 1-4% p/mo
1-3 business days
Revenue-Based Business Loans
$10K - $5M
Starting at 1-6% p/mo
1-2 business days
Business
Line of Credit
$1K - $250K
Starting at 1% p/mo
1-3 business days
Approved businesses generally meet the following criteria:
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Annual Revenue: $75K+
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Credit Score: 550+
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Time in Business: 6 months+
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Who Qualifies For Business
Term Loans?
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Step 1: Consider Your Financing Needs:
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Ensure this is the right financing option for your goals.​
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Step 2: Gather Your Documents:
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Driver's License
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Voided business check
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Business bank statements (past three months)
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Step 3: Complete the Application:
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Submit your application online or over the phone.
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Step 4: Speak to a Representative:
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Review repayment structure, rates, and terms with a funding expert.​
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Step 5: Receive Approval:
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Funds typically appear in your account within 1-3 business days.
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How To Apply For Business Term Loans
If your application is declined, it could be due to insufficient credit, revenue, or cash flow. This doesn't mean you won't qualify for other beneficial financing options. Consider exploring:
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Business credit cards
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Alternative business loan programs
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​Improving your personal and business credit scores can also increase your chances of approval for future applications.
What If I'm Declined For a Business Term Loan?
Business Term Loans FAQs
Is a Business Loan the Same as a Business Term Loan?
No, not all business loans are term loans. A business term loan involves a lump sum payment with fixed repayment terms, while other loans, such as lines of credit or merchant cash advances, have different structures and repayment methods.
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Are Microloans the Same as Business Term Loans?
Microloans are a type of business term loan but are typically for smaller amounts and shorter repayment terms. They are often geared toward startups or small businesses with specific funding needs.
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Can I Pay Off My Business Term Loan Early?
It depends on the lender and the loan terms. Some business term loans allow early repayment without penalties, while others may charge a prepayment fee.
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What's the Difference Between Business Term Loans and Business Credit Lines?
A business term loan provides a lump sum with fixed payments over a set period. A business line of credit allows you to draw funds as needed, paying interest only on what you use, with flexible repayment terms.
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How Much Does a Business Term Loan Cost?
The cost of a business term loan depends on the interest rate, loan amount, and term length. Fixed interest rates and factor rates starting at 1-4% per month are common, but total costs vary based on lender terms.
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Is Collateral Necessary for Business Term Loans?
Not always. Many term loans are unsecured, meaning no collateral is required. However, secured term loans may offer better rates or higher borrowing amounts by requiring collateral.
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Can I Get a Business Term Loan with Bad Credit?
Yes, some lenders specialize in providing business term loans to borrowers with less-than-perfect credit. However, these loans may come with higher interest rates or lower borrowing limits.
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