A business term loan provides a lump sum of capital that is repaid over an agreed period, according to the payment structure, costs and terms disclosed in the financing offer.
For businesses with a clear investment or financing need, a term loan can provide predictable financing for expansion, equipment, improvements, working capital and other eligible business purposes.
RockDrive Business Capital helps businesses explore term-loan options from independent financing providers and understand the available terms before deciding whether an option is appropriate.
What Is a Business Term Loan?
A business term loan is a traditional form of business financing. An approved business receives an agreed amount of capital upfront and repays the financing over a specified term.
Depending on the provider and financing agreement, repayment schedules, rates, fees and term lengths can vary.
Before accepting an offer, businesses should understand the amount being financed, applicable interest and fees, repayment schedule, total repayment obligation and any other conditions contained in the agreement.
What Can a Business Term Loan Be Used For?
Businesses may seek term financing for many purposes, including:
Business Expansion
Opening another location, increasing capacity or investing in a planned expansion.
Equipment and Machinery
Purchasing equipment required to operate or grow the business.
Renovations and Improvements
Updating commercial premises or making improvements to existing facilities.
Inventory
Purchasing inventory to meet expected demand or support growth.
Marketing and Growth
Investing in advertising, customer acquisition or other growth initiatives.
Working Capital
Providing additional capital for eligible operating and business expenses.
The permitted use of funds depends on the provider and financing agreement.
How Do Business Term Loans Work?
The process generally starts with an application and review of your business’s financial profile.
Providers may consider factors such as revenue, time in business, bank activity, credit profile, industry and the amount requested.
If approved, you’ll receive an offer setting out the financing amount and applicable terms.
Before accepting, review the offer carefully. Pay particular attention to the:
Financing amount
How much capital the business will receive.
Interest rate and fees
Understand the costs associated with the financing.
Repayment term
How long you’ll have to repay the loan.
Payment schedule
How frequently payments are required.
Total repayment obligation
Understand the overall cost rather than looking only at the periodic payment.
Who May Qualify for a Business Term Loan?
Requirements vary significantly between financing providers.
Providers may consider:
- Time in business
- Monthly or annual business revenue
- Business and personal credit profile where applicable
- Existing business obligations
- Bank account activity and cash flow
- Industry
- Purpose of financing
- Amount requested
- Overall financial condition of the business
Meeting particular criteria does not guarantee approval.
Business Term Loan vs. Working Capital Financing
A term loan describes a particular financing structure: a lump sum is provided and repaid over an agreed term.
Working capital, on the other hand, generally describes what the business needs the capital for rather than one specific financing product.
A business may therefore use the proceeds of a term loan for working capital, depending on the terms of the financing agreement.
Business Term Loan vs. Business Line of Credit
A term loan generally provides the approved financing amount upfront.
A business line of credit works differently. An approved business may access funds from its available credit line when needed, subject to the provider’s terms.
A term loan may make sense when a business knows how much it needs for a specific planned expense. A line of credit may provide greater flexibility when financing needs arise at different times.
The better option depends on the business’s circumstances and the terms available.
Explore Business Lines of Credit →
When Could a Business Term Loan Make Sense?
Consider a construction company investing in machinery that will be used for several years.
Or a retailer renovating a location to increase capacity.
Or an established business investing in an expansion project with a defined budget.
In situations like these, receiving an agreed amount upfront and repaying it over a defined period may be more appropriate than repeatedly accessing short-term financing.
However, financing should ultimately make economic sense for the business. The expected benefit of using the capital should be considered alongside the cost and repayment obligation.
How the RockDrive Process Works
1. Tell Us About Your Business
Provide basic information about your business and financing needs.
2. Explore Available Options
If eligible, RockDrive can help you explore financing options available through independent providers.
3. Review the Terms
Carefully review the amount, costs, repayment schedule, term and other conditions associated with an available offer.
4. Make Your Decision
Decide whether an available financing option makes sense for your business. There is no obligation to accept an offer simply because you applied.
Frequently Asked Questions
How much can I borrow with a business term loan?
Available financing amounts vary according to the provider and applicant. Revenue, time in business, credit profile, cash flow, existing obligations and other underwriting factors may affect the amount available.
How long are business term loans?
Term lengths vary between financing products and providers. The applicable term will be disclosed in the financing offer.
What credit score do I need?
There isn’t one credit requirement applicable to every provider. Credit requirements vary according to the provider, product and overall financial profile of the applicant.
What documents might be required?
Depending on the provider, businesses may be asked for business bank statements, identification, financial statements, tax returns or other business and financial documentation.
How quickly can a business term loan be funded?
Processing and funding times vary depending on the provider, applicant, financing product and required documentation. RockDrive does not guarantee a particular approval or funding time.
Does applying guarantee approval?
No. Financing is subject to application, underwriting, eligibility requirements and approval by the applicable financing provider.
Explore Business Term Loan Options
If your business is considering expansion, equipment, improvements or another significant investment, RockDrive Business Capital can help you explore financing options that may be available.