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Business Term Loans: Compare Options and Apply for Financing

Last updated on September 13, 2023
Edited byChristine Aebischer
✅Fact checked and reviewed

⏰ Estimated read time: 5 minutes

Term loans can finance one-time investments for your business. Banks, credit unions and online lenders all offer small-business term loans.

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A business term loan is a lump sum of capital that you borrow from a lender and repay on a fixed schedule over a set period of time, otherwise known as a term. These small-business loans can be among the least expensive forms of business financing. They may be used for a variety of purposes and are good for making long-term investments in your business.
Below, compare some of the best options for business term loans. Plus, learn more about how these loans work and how to apply for financing.

How much do you need?

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We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Here are 6 business term loans

LenderNerdWallet Rating▼Max loan amount▼Min. credit score▼Next steps

TAB Bank - Term loan

Best for Low-interest business term loans

$300,000660

SBA 7(a) loan

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Best for Government-guaranteed term loans

$5,000,000650

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SBA Express loan

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Best for Government-guaranteed term loans

$500,000650

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Funding Circle - Online term loan

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4.5/5

Best for Business term loans for established companies

$500,000660

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OnDeck - Online term loan

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5.0/5

Best for Unsecured business term loans

$250,000625

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Fora Financial - Online term loan

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4.5/5

Best for Business term loans for bad credit

$1,500,000500

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Here are 6 business term loans

Best for Low-interest business term loans

TAB Bank

Max Amount

$300,000

Min. Credit Score

660

Best for Government-guaranteed term loans

U.S. Small Business Administration

Max Amount

$5,000,000

Min. Credit Score

650

U.S. Small Business Administration

Max Amount

$500,000

Min. Credit Score

650

Best for Business term loans for established companies

Funding Circle

Max Amount

$500,000

Min. Credit Score

660

Best for Unsecured business term loans

OnDeck

Max Amount

$250,000

Min. Credit Score

625

Best for Business term loans for bad credit

Fora Financial

Max Amount

$1,500,000

Min. Credit Score

500

I'M INTERESTED IN:

Our pick for

Low-interest business term loans

Bank loans typically offer the lowest interest rates, but you’ll need strong credit and finances to qualify.

TAB Bank - Term loan

Max Loan Amount
$300,000
Min. credit score
660
Est. APR
8.99-35.99%
TAB Bank offers competitive interest rates for business owners with strong credit — and can sometimes fund faster than an SBA loan.

Max loan

$300,000

Min. Credit score

660

Apr range

8.99-35.99%

TAB Bank offers competitive interest rates for business owners with strong credit — and can sometimes fund faster than an SBA loan.

Our picks for

Government-guaranteed term loans

SBA loans offer competitive interest rates and repayment terms. They can be difficult to qualify for, however, and are slow to fund.

SBA 7(a) loan

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Max Loan Amount
$5,000,000
Min. credit score
650
Est. APR
11.50-15.00%
7(a) loans are issued by private lenders and backed by the SBA. They offer long repayment terms and low interest rates.
Lowest interest rate

Max loan

$5,000,000

Min. Credit score

650

Apr range

11.50-15.00%

7(a) loans are issued by private lenders and backed by the SBA. They offer long repayment terms and low interest rates.
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SBA Express loan

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Max Loan Amount
$500,000
Min. credit score
650
Est. APR
11.50-15.00%
SBA Express loans are available in amounts up to $500,000 as either a term loan or line of credit. These loans typically fund faster than standard 7(a) loans.

Max loan

$500,000

Min. Credit score

650

Apr range

11.50-15.00%

SBA Express loans are available in amounts up to $500,000 as either a term loan or line of credit. These loans typically fund faster than standard 7(a) loans.
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Our pick for

Business term loans for established companies

If you have at least two years in business and good credit, these online lenders may be able to offer term loans with competitive rates and terms.

Funding Circle - Online term loan

4.5
NerdWallet rating 
Read Review

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Max Loan Amount
$500,000
Min. credit score
660
Est. APR
15.22-45.00%
Funding Circle is an option for established businesses that are financing an expansion or refinancing debt.
May fund quickly
4.5
NerdWallet rating 

Max loan

$500,000

Min. Credit score

660

Apr range

15.22-45.00%

Funding Circle is an option for established businesses that are financing an expansion or refinancing debt.
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Our pick for

Unsecured business term loans

Many online lenders don’t require physical collateral to secure a loan. These lenders will typically require a personal guarantee and/or a Uniform Commercial Code lien, however.

OnDeck - Online term loan

5.0
NerdWallet rating 
Read Review

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Max Loan Amount
$250,000
Min. credit score
625
Est. APR
35.40-99.90%
OnDeck offers a fast term loan for small-business owners with less-than-stellar credit who want to expand.
May fund quickly
5.0
NerdWallet rating 

Max loan

$250,000

Min. Credit score

625

Apr range

35.40-99.90%

OnDeck offers a fast term loan for small-business owners with less-than-stellar credit who want to expand.
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Our pick for

Business term loans for bad credit

Business term loans for borrowers with credit challenges are usually issued by online lenders. These lenders have flexible credit score requirements, but will likely charge you more for financing.

Fora Financial - Online term loan

4.5
NerdWallet rating 
Read Review

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Max Loan Amount
$1,500,000
Min. credit score
500
Fora Financial can be a good fit for borrowers who may fall short of qualifying for traditional bank financing or young but established small businesses looking for speedy financing.
4.5
NerdWallet rating 

Max loan

$1,500,000

Min. Credit score

500

Fora Financial can be a good fit for borrowers who may fall short of qualifying for traditional bank financing or young but established small businesses looking for speedy financing.
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How Much Do You Need?

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How do business term loans work?

Business term loans can range in size from $5,000 to $5 million, with annual percentage rates (APRs) falling anywhere from 6% to 99%. These loans often have fixed interest rates, but you may find some lenders charge a variable rate that changes based on the market. Additional fees, like closing and origination fees, may vary based on the lender and the type of term loan.
Like mortgages and car loans, small-business term loans usually 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 often be repaid early to save on interest, although lenders may charge a prepayment penalty.
Businesses can use term loans for a variety of purposes, including:
  • Purchasing equipment or inventory.
  • Renovating an existing location or expanding to a new location.
  • Purchasing real estate.
  • Hiring new employees.
  • Working capital.
  • Refinancing existing debt.

Business term loan example

To get a better sense of how small-business term loans work, consider this example:
If you had 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.You can use NerdWallet’s business loan calculator to figure out the costs and repayments on a term loan.

Types of business term loans

Short-term loans

These loans typically have repayment terms of 12 months or less, although some may have terms that extend up to 24 months. Short-term business loans are usually offered by online lenders and are fast to fund.
Although these loans can be easier to qualify for than some other business term loans, they often have higher interest rates with larger payments required on a daily or weekly basis.

Medium-term loans

Medium-term loans generally have repayment terms ranging from one to five years. These loans are available from online lenders, as well as banks and credit unions.
Compared with short-term loans, you may have to meet stricter requirements to qualify for a medium-term loan. However, these products can have more affordable interest rates.
Typically, medium-term loans are repaid on a weekly or monthly basis, making individual payments more manageable.

Long-term loans

Although medium-term loans and long-term loans are sometimes grouped together, long-term loans typically refer to loans with a repayment period of more than five years.
Long-term business loans are usually slow to fund and more difficult to qualify for but offer low interest rates and ideal terms for financing large projects, such as real estate purchases or business renovations.
These loans are generally repaid on a monthly basis, with lower individual payments spread out over a longer period of time. The total cost of debt may be higher overall compared with short-term or medium-term loans.
» MORE: Compare the best low-interest business loans

Pros and cons of business term loans

Pros

  • You can borrow large amounts of money to finance expansion or growth.
  • Long repayment terms can make big investments more affordable.
  • Repaying term loans on time may help you build business credit.
  • Loans from online lenders can be approved and funded quickly, usually within a few days to a week.
  • Qualification requirements for online lenders may be looser than those for traditional banks.

Cons

  • Less flexibility than business lines of credit, as payments begin immediately after funding.
  • Shorter term loans may carry high costs and frequent repayments, although this depends on the lender.
  • SBA loans are low cost but carry strict requirements and can take a while to fund.
  • Collateral — an asset, such as equipment or real estate that the lender can sell if you can’t make payments — may be required.

How to apply for a business term loan

If you think a term loan is right for your financing needs, you can follow these steps to apply:
  1. Evaluate your qualifications. Check your credit score, annual revenue and time in business. These are three of the key business loan requirements lenders will look at to determine whether you qualify for financing.
  2. Compare lenders. Decide which type of lender is best for your needs. Online lenders may have more flexible qualifications and faster funding times but higher interest rates. Banks, credit unions and SBA lenders can offer more affordable rates, but their products can be harder to qualify for.
  3. Prepare your documentation. Once you’ve decided which lender is right for you, prepare the documentation for your application. Commonly required documents include business financial statements, business and personal tax returns, business and personal bank statements, and business legal documents. As much as you can, keep up-to-date financial records and meet with your business accountant on a regular basis. 
  4. Complete and submit the application. Follow the lender’s instructions to complete the application and provide all necessary documents. Take advantage of any assistance the lender offers to guide you through the application process.
» Use our guide for more information on how to apply for a small-business loan.

Find the right business loan

The best business loan is generally the one with the lowest rates and most ideal terms. But other factors — like time to fund and your business’s qualifications — can help determine which option you should choose. NerdWallet recommends comparing small-business loans to find the right fit for your business.
Last updated on September 13, 2023

Wondering if you qualify?

It’s possible to get a business loan even if you have bad credit. Bad-credit business loans are available from alternative sources, like online or nonprofit lenders.

Learn more

Frequently Asked Questions