Term Loan
A loan with a fixed repayment schedule over a set period.
A term loan provides a lump sum of capital repaid through fixed payments over a defined period (the "term"). Short-term loans (under 1 year) are for immediate needs, medium-term (1–5 years) for equipment or growth, and long-term (5–25 years) for real estate or major capital projects. Rates can be fixed or variable.
Example
A construction company takes a $200,000 medium-term loan with a 5-year term and fixed monthly payments of $3,950 to purchase two new excavators.
Why It Matters for Your Business
Term loans provide predictable payment schedules that make cash flow planning easier, but matching the loan term to the asset's useful life is critical.
Related Terms
More Banking Terms
ACH
Automated Clearing House - an electronic network for financial transactions.
APR
Annual Percentage Rate - the yearly cost of borrowing including fees.
APY
Annual Percentage Yield - the real rate of return on savings including compound interest.
Bank Reconciliation
Matching bank statements with internal records to identify discrepancies.
Business Checking
A bank account designed for business transactions.
Related Financial Guides & Resources
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