Term Loan

A term loan is the most straightforward form of business borrowing: a lender advances a fixed sum of money that is repaid in regular (usually monthly) instalments over an agreed period, with interest charged at an agreed rate. At the end of the term, the loan is fully repaid.

Term loans can be short-term (three to 12 months), medium-term (one to five years), or long-term (five years and above for secured facilities on property). They can be secured (backed by property or assets, attracting lower rates) or unsecured (requiring only a personal guarantee, offering faster access).

Term loans differ from revolving credit facilities in that once repaid, a term loan cannot be redrawn - a new application would be required. They are most suitable for specific, defined purposes where a known amount is needed for a defined period: equipment purchase, expansion, acquisition, or one-off investment.

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