# Term Loan

> A term loan is a lump sum of money you borrow and repay in regular, scheduled installments over a fixed period of time, usually with interest at a set or variable rate.

## Key takeaways
- A term loan gives you a fixed lump sum repaid in regular installments over a set term, so you know the total, payment, and payoff date from the start.
- Term loans fit one-time, known expenses like expansion, equipment, or refinancing, whereas a revolving line of credit suits ongoing or unpredictable needs.
- Compare offers on APR rather than rate, and check for origination fees and prepayment penalties before borrowing.

## How a term loan works

A term loan is the most familiar form of business financing: you borrow a
**fixed lump sum** up front and pay it back in **regular installments** —
typically monthly — over an agreed **term**. Each payment covers both principal
and interest, and the loan is fully repaid by the end of the term.

For example, a business might borrow **$100,000** over **five years** at a set
interest rate, making the same scheduled payment each month until the balance
reaches zero.

### Common features

- **Set amount and schedule:** you know the total, the payment, and the payoff
  date from the start.
- **Fixed or variable rate:** fixed keeps payments predictable; variable can
  rise or fall with a benchmark like the prime rate.
- **Secured or unsecured:** larger or longer loans often require collateral.
- **Fees:** many carry an **origination fee**, and some include a **prepayment
  penalty**.

### When a term loan fits

Term loans suit **one-time, known expenses** — expansion, equipment, real estate,
or refinancing — where you need the full amount now and value predictable
payments. SBA loans and most bank loans are structured this way. For ongoing or
unpredictable needs, a revolving line of credit is often a better match.

### What to watch for

- Compare the **APR**, not just the rate, so fees are included.
- Check for **prepayment penalties** if you might pay off early.
- Make sure the payment fits your cash flow — shorter terms mean higher payments
  even when total interest is lower.

Hoss Capital can help you compare term loans against other structures to find the
right fit for what you're funding.

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