A term loan is a lump sum of capital that a business borrows and agrees to repay over a fixed period—anywhere from a few months to several years. These loans usually come with fixed interest rates and predictable repayment schedules, making them appealing for businesses with specific funding goals.
Term loans are ideal for small business owners planning major investments—such as expanding operations, hiring staff, purchasing inventory, or upgrading equipment. Unlike revolving credit, term loans offer certainty: you know exactly how much you owe and when it’s due.
Term Loan vs. Line of Credit: Know the Difference
Many business owners confuse term loans with lines of credit. But they’re structured quite differently. A line of credit gives you access to funds up to a limit, and you draw as needed. A term loan gives you a one-time lump sum with fixed payments over a set time frame.
If your business requires ongoing capital access, a line of credit may suit you. But if you’re funding a specific project—say, opening a second location—a term loan can offer the focus and predictability you need.
Feature
Term Loan
Line of Credit
Funds Received
Lump Sum
As Needed
Interest Structure
Fixed
Variable
Repayment Terms
Set Period
Ongoing
Best Use Case
Major Expenses
Short-Term Flexibility
The Value of Fixed Payments: Budgeting Made Easy
Predictable payments are one of the most attractive features of term loans. You can easily budget around fixed installments, ensuring that your monthly outflow remains consistent and manageable.
This stability contrasts with merchant cash advances (MCAs) or variable-interest lines of credit. While those options offer flexibility, they can create unexpected pressure if your business hits a slow month.
To determine whether a term loan or MCA works best, try ourMCA Calculator. It helps estimate payback amounts, so you can compare with term loan options.
Fast Approvals Make a Big Difference
Gone are the days when banks took weeks to approve loans. Online lenders and platforms like Capital Express now offer streamlined application processes. You can often receive approval within 24 to 48 hours and funds within a few business days.
That speed is a game-changer when a sudden growth opportunity arises. Whether it’s a vendor deal or a real estate lease, fast funding can give your business a decisive edge.
When a Term Loan Beats an MCA
While merchant cash advances are known for speed and flexibility, term loans shine when you need structured, longer-term financing. They often come with lower interest rates, longer repayment periods, and the added benefit of helping you build credit.
Not sure what suits you best? Use theMCA calculator to estimate MCA costs, and compare them with your term loan offer. Understanding total cost of capital is key to making the right choice.
Criteria
Term Loan
MCA
Repayment Length
Longer (1-5 years)
Shorter (3-18 months)
Interest Rate
Lower
Higher
Builds Business Credit
Yes
Sometimes
Best For
Planned Growth
Urgent Cash Needs
Using the Capital Express Credit Card for Short-Term Gaps
Sometimes, you get approved for a term loan but need to make purchases before the funds arrive. TheCapital Express credit card is ideal for bridging this gap.
It provides immediate purchasing power and flexible repayment terms. ManyCapital Express reviews highlight how this card supported short-term operational needs while waiting for long-term financing.
Partnering with Equipment Finance Brokers
Planning to use your term loan to purchase heavy machinery or new equipment? Consider working withequipment finance brokers. They often help secure better terms than general lenders, especially for industry-specific assets.
Equipment brokers assess your needs and match you with lenders that specialize in your business type. It saves time and can even reduce your total cost of ownership. This allows you to stretch your term loan further and fund other revenue-driving initiatives.
Smart Uses of Term Loans for Business Growth
Term loans should be used strategically. Think of them as fuel to power long-term growth—not a bandage for recurring shortfalls. Common smart uses include:
One of our clients, a restaurant chain owner, used a 36-month term loan to renovate two locations and open a third. The structured payments allowed for predictability while revenue grew steadily.
Another client used the Capital Express credit card for initial expenses while awaiting loan approval. Once the loan landed, they paid down the card balance and used the remaining capital to hire staff and ramp up marketing.
Final Thoughts: Term Loans That Drive the Future
The right term loan can fuel innovation, stability, and growth for your business. It offers structure, scalability, and lower borrowing costs than many other options. Combined with tools like the MCA calculator, Capital Express credit card, and guidance from equipment finance brokers, you can confidently scale without financial stress.
