Best Of
Business term loans can finance one-time investments for your small business. Your options include SBA loans and business loans from online lenders.
Does your business need to purchase equipment, renovate office space or make a similar type of investment? A term loan is likely your best option, giving you the cash to grow your business.
Term loans for businesses are offered by traditional banks, credit unions and online lenders. Here’s what you need to know about term loans, including their pros and cons and how to apply for financing. It's always smart to compare small-business loans to find the right type of financing for you.
Our picks for
Term loans from online lenders
6.99 - 24.99%
650
Pros
Cons
Qualifications:
12.18 - 36.00%
660
Pros
Cons
Qualifications:
9.00 - 99.00%
600
Pros
Cons
Qualifications:
Lender | Best For | Est. APR | Min. Credit Score | Next Steps |
---|---|---|---|---|
Credibility Capital - Online term loan | Best for Term loans from online lenders | 6.99 - 24.99% | 650 | See Your Loan Options
with Fundera by Nerdwallet |
Funding Circle - Online term loan | Best for Term loans from online lenders | 12.18 - 36.00% | 660 | See Your Loan Options
with Fundera by Nerdwallet |
OnDeck - Online term loan | Best for Term loans from online lenders | 9.00 - 99.00% | 600 | See Your Loan Options
with Fundera by Nerdwallet |
If you have a car loan, student loan or a mortgage, then you likely already know how a term loan works. You borrow a lump of cash upfront for a specific purpose and repay the loan over a set period of time with fixed, equal payments.
Requirements, rates and speed of funding vary between banks and online lenders. Term loans range in size from $2,000 to $5 million, with annual percentage rates ranging from 6% to 99%.
Banks offer low rates on term loans, but typically carry stricter requirements — such as a strong personal credit score and high annual revenue — and take longer to fund. Bank term loans typically have long repayment terms of up to 10 years.
Online lenders offer speed and convenience, but typically carry higher costs. They also tend to have looser qualifications than banks. In addition, you can get short-term loans with repayment terms between three months and three years from online business lenders.
Both banks and online lenders provide Small Business Administration loans, which are guaranteed by the federal agency. This type of term loan provides up to $5 million and carries repayment terms of up to 25 years, depending on what the money is for. SBA loans also have some of the lowest APRs, making them a good option for long-term financing.
Like mortgages and car loans, term loans typically follow an amortization schedule. This means most of your payment goes toward paying interest at the beginning of the loan, and more toward principal near the end. Term loans can usually be repaid early to save on interest, although lenders may charge a prepayment penalty.
Term loan example: On a $100,000 term loan with a five-year repayment period at 20% APR, you’d make fixed monthly payments of $2,649 and pay total interest and fees of $58,963. Use NerdWallet’s business loan calculator to figure out the costs and repayments on a term loan.
For information on other financing options, read our guide on business loan types.
CONS
To recap our selections...