A term loan is a type of business financing that provides a lump sum of money upfront, which you repay over a set period according to an agreed schedule. Term loans for small businesses are commonly used for large, planned expenses such as equipment, renovations, expansion, or other investments with a defined cost.
Depending on the lender and loan offer, a term loan may have a fixed or variable rate, and it may be secured by collateral or unsecured. The loan amount, repayment period, rate, fees, and qualification requirements vary by lender.
What you need to know
- A term loan gives you a lump sum upfront. You borrow an approved amount at once rather than drawing funds over time.
- You repay the loan on a set schedule. Repayment terms, payment frequency, rates, and fees depend on the lender and offer.
- Term loans work well for defined expenses. Businesses often use them for equipment, renovations, expansion, inventory, and other planned investments.
- Term loans can be secured or unsecured. Some require collateral, while others rely more heavily on the business and owner’s financial profile.
- Bluevine connects eligible applicants with term loans from lending partners. Partner term loans available through Bluevine can be as large as $500,000, with repayment schedules of up to 24 months. Offerings and eligibility requirements vary by partner.
How do term loans work?
A business term loan is installment financing. Once the lender approves your loan, you receive an agreed amount of money upfront and repay it over a defined period.
Unlike a revolving business line of credit, a term loan does not automatically replenish as you repay it. Once you have received and repaid the loan, you generally need to apply for new financing if you need additional funds.
Several features determine how a term loan works.
Loan amount
Your loan amount is the principal, or the amount you borrow before interest and applicable fees.
How much a lender is willing to provide can depend on your revenue, credit profile, time in business, existing debts, intended use of funds, and other underwriting criteria.
Repayment term
The term is the length of time you have to repay the loan. A lender establishes a repayment schedule that specifies when payments are due and how long repayment will last.
A longer term can spread repayment across more time, while a shorter term repays the balance faster. The exact cost and payment structure depend on the loan offer.
Fixed vs. variable rates
A term loan can have a fixed or variable rate, although fixed rates are common.
With a fixed rate, the rate does not change during the loan term, which can make borrowing costs more predictable. With a variable rate, the rate can change according to the terms of the loan, which means financing costs may rise or fall over time.
Always review the specific rate structure in an offer rather than assuming all term loans work the same way.
Amortization
Many term loans use an amortization schedule. In simple terms, amortization means each scheduled payment applies toward what you borrowed and the cost of borrowing.
Early payments may allocate a different proportion toward financing costs than later payments, depending on the loan structure. By the end of the repayment schedule, the loan balance is paid off if all required payments have been made.
Secured vs. unsecured term loans
A secured term loan requires collateral that the lender can claim under the loan agreement if the borrower does not meet its repayment obligations. Collateral might include business assets such as equipment, real estate, inventory, or other property.
An unsecured term loan is not tied to specific collateral in the same way. However, lenders can still consider the business owner’s credit, business performance, guarantees, and other underwriting factors when evaluating the application.
The terms available for secured and unsecured financing can vary widely by lender and borrower.
What can you use a term loan for?
Term loans can be useful when a business has a planned expense with a relatively clear upfront cost. Because you receive the financing as one lump sum, the structure can make it easier to match the amount borrowed to a specific project or investment.
Common business uses include:
Buying equipment
A term loan can help fund machinery, commercial vehicles, computers, restaurant equipment, or other assets your business needs to operate.
If equipment is your main financing need, it can also be useful to understand how a general term loan differs from dedicated equipment financing.
Expanding or renovating
Opening another location, renovating an existing space, or increasing production capacity can require a large upfront investment. A term loan can provide a defined amount of capital for those planned costs.
Purchasing inventory
Businesses preparing for a large order, seasonal demand, or an expansion may use term financing to purchase inventory in advance.
Hiring and business growth
Term-loan proceeds may also support eligible costs related to hiring, marketing, new products, or other growth initiatives.
The key distinction is predictability. A term loan generally aligns more naturally with an expense when you know roughly how much funding you need upfront and can evaluate that cost against a defined repayment schedule.
Do you qualify for a term loan?
Term-loan eligibility varies by lender. There is no single credit score, revenue level, or time-in-business requirement that applies to every term loan.
Lenders commonly evaluate factors such as:
- Personal and business credit: Your credit history can help a lender evaluate how you have managed existing financial obligations.
- Time in business: A longer operating history gives lenders more financial information to evaluate.
- Revenue and cash flow: Lenders may review whether your business generates enough money to support repayment.
- Existing debt: Current loans and other obligations can affect your overall ability to take on additional financing.
- Business standing: Lenders may consider whether your company is active and in good standing.
- Collateral: For secured financing, the lender may evaluate the value and type of assets supporting the loan.
- Use of funds: Some lenders may ask how your business intends to use the proceeds.
You may also need to provide financial records such as business bank statements, tax returns, income statements, balance sheets, or other documentation. Requirements vary by lender.
What are the requirements for term loans available through Bluevine?
Bluevine does not directly issue term loans. Instead, one application can also allow eligible applicants to be considered for term-loan offers from Bluevine’s network of lending partners.
Each partner has its own eligibility requirements. Common factors include your personal FICO score, time in business, monthly or annual revenue, and whether your business is in good standing with no bankruptcies.
Eligible businesses may receive partner term-loan offers of up to $500,000, with predictable repayment schedules of up to 24 months. Applications are subject to credit approval, and offerings, rates, terms, amounts, and eligibility requirements vary by partner.
You can learn more about current options and term loans available through Bluevine’s lending partners.
What are the benefits of term loans for small businesses?
The structure of a term loan can be useful for businesses that value a defined amount of financing and a set repayment period.
Large upfront funding. A lump sum can help cover projects that require most or all of the capital at the beginning.
Predictable repayment. A defined repayment schedule gives businesses visibility into when payments are due. Fixed-rate term loans can provide additional predictability because the rate remains the same throughout the loan term.
Clear end date. Unlike revolving credit, a term loan has a defined repayment period. Once the scheduled balance is repaid, the loan is complete.
Flexible business uses. Depending on the lender and loan agreement, proceeds may be used for expenses ranging from equipment and real estate to inventory and growth projects.
These benefits need to be weighed against the terms of the specific offer. A term loan creates a repayment obligation regardless of whether the investment produces the outcome your business expected, so understanding the total financing cost and repayment requirements matters.
Term loans vs. other business financing
The biggest difference between a term loan and other financing is how your business receives and repays the money.
A term loan provides one lump sum that you repay over a set period. A business line of credit provides revolving access to funds up to an approved limit, allowing you to draw funds as needs arise and replenish your available credit through repayment.
That makes the two products suited to different types of financing needs. A planned expansion or equipment purchase with a known price may align with a term loan, while changing inventory needs, temporary cash flow gaps, or recurring operating expenses may call for more flexible access to capital.
There are additional differences in rates, borrowing costs, repayment structures, funding amounts, and qualification requirements. For a deeper breakdown, see our guide to choosing between a term loan vs. a business line of credit.
How can Bluevine help you explore term loan financing?
Bluevine does not directly offer business term loans. Bluevine’s lending partners offer term loans, and one online application can allow your business to be considered for financing options available through Bluevine and its partner network.
Partner term loans available through Bluevine include:
- Loan amounts up to $500,000
- Predictable repayment schedules of up to 24 months
- Funding that can be used for operating costs or growth opportunities
- An online application that does not impact your personal credit score when you apply and review an offer
After you submit an application, Bluevine and its lending partners evaluate your information. If eligible, you may receive a Bluevine Line of Credit offer or financing offers from participating lending partners. Term-loan offerings and eligibility vary by partner.
If your business is planning a large purchase or project and a lump-sum financing structure matches that need, you can explore term-loan financing through Bluevine.BVSUP-00151
Understand the structure before choosing financing
Understanding what a term loan is starts with its basic structure: your business receives a lump sum upfront and repays it according to a defined schedule.
That structure can align well with planned expenses such as equipment, expansion, renovations, or other investments where you know how much capital you need. For expenses that change over time, revolving financing such as a line of credit works differently and may be worth comparing.
Bluevine helps simplify that comparison with one application that can allow eligible businesses to be considered for a Bluevine Line of Credit and term loan offers from participating lending partners.
Access the working capital your business needs to scale.
Term loan FAQs
A term loan is money a business borrows as one lump sum and repays over an agreed period. The lender sets a repayment schedule, and the borrower makes payments until the balance and applicable financing costs are repaid. Rates can be fixed or variable, and a term loan may be secured or unsecured depending on the lender and offer.
Suppose a business needs $50,000 for a planned renovation. A lender could provide the $50,000 upfront and establish a repayment schedule for the agreed loan term. The business would then make the required payments according to the loan agreement until the balance is repaid. Actual rates, fees, payment amounts, and terms depend on the lender and borrower.
A term loan is repaid according to a predetermined schedule established in the loan agreement. Payments generally include repayment of the principal plus applicable financing costs. Payment frequency, loan length, rates, fees, and whether early-repayment costs apply can vary by lender and offer.
Neither financing type is universally better. Term loans generally fit defined, one-time expenses because they provide a lump sum upfront. Lines of credit provide revolving access to capital and may better fit recurring or unpredictable expenses. The appropriate structure depends on the amount needed, timing, cash flow, and repayment requirements. See our term loan vs. line of credit comparison for a closer look.
Bluevine does not directly offer term loans, but you can submit one simple application for multiple types of financing, including the Bluevine Line of Credit and term loans via partners. Eligible applicants may be considered for term loans from Bluevine’s network of lending partners. Partner term loans are currently available for up to $500,000, with repayment schedules of up to 24 months. Offerings and eligibility requirements vary by partner.
