Funding options
Term loan
One sum, once, and a payment that is the same every month until it is gone. The most familiar shape of money, and short of an SBA loan usually the one that takes the most paperwork to arrange.
About two minutes. No credit pull to start. Free to you. Funding partners pay Addy for the introduction. Not an offer or an approval.
- How it is priced
- Interest at an annual rate on the balance, usually fixed for the term, plus an origination fee taken out up front.
- How you repay
- Equal monthly payments over a set term, commonly one to five years.
- What owners use it for
- A second location, a big stock order, a hire you can carry for a year. A purchase you can plan.
Amounts, rates and terms come from the funding partner and depend on what your file shows. I do not set them, and I cannot promise them.
What it is
The plain version.
A term loan is the shape most people picture when they hear "business loan". A partner sends one sum, you repay it in equal monthly instalments over a fixed term, and the interest is set at the start. The payment does not move, which is the point: you know the outflow for every month of the term on day one.
It is credit, underwritten like credit. A partner is deciding whether the business will still be here in year three and pricing that risk, so the file it reads is longer than an advance needs: trading history, deposits, the owner’s credit, sometimes financials. That is why a term loan is usually cheaper than an advance and usually slower to arrange.
Most carry an origination fee, taken out of the sum before it lands, and many carry a personal guarantee. Read both lines before you sign, and ask whether paying it off early costs anything.
What the money costs
- You borrow
- $75,000
- Illustrative rate
- 12% a year
- Repaid over
- 36 monthly payments
- Monthly payment
- about $2,491
- Interest paid
- about $14,700
Illustration only, not a quote. I picked the rate to show the arithmetic; a partner sets the real one, and an origination fee sits on top of it.
The same $75,000 as a merchant cash advance at a 1.30 factor rate would mean remitting $97,500, or $22,500 for the money, usually out of the next year of deposits rather than three. The term loan costs less and takes longer to arrange. Which trade is right depends on what the money buys and how soon you need it.
How it works
Four steps, and the one that surprises people is the last.
- 1
A partner reads the file
Trading history, deposits and their trend, the owner’s credit, sometimes a set of financials. A longer read than an advance, which is part of why it is cheaper.
- 2
You are offered a sum, a rate and a term
All three fixed at the start. The origination fee comes out of the sum, so ask what actually lands in the account.
- 3
The money lands once
One deposit. There is no drawing more later; that is what a line of credit is for.
- 4
You pay the same amount every month
Until the term ends. Whether paying it off early saves interest is in the contract, not in the sales call.
What partners may read
What a funding partner may look at.
- How long the business has been trading, and a longer history than an advance usually asks for
- Monthly deposits, how steady they are, and which way they are trending
- The owner’s personal credit
- Debt already outstanding, and what it takes out each month
- Profit, if the partner asks for financials or tax returns
- The industry, and who actually pays you
My read of what underwriting tends to weigh, not a list anyone published and not a test I score. Every partner sets its own criteria and none has told me what they are. Partners underwrite and decide; my job is to make the request readable so the answer comes back either way.
When it fits
- The purchase is planned, priced and weeks away, not needed by Friday
- What the money buys will earn over the whole term, not just this quarter
- You want one payment that does not move, and can carry it in your thinnest month
- You have the records a longer read needs: statements, returns, an EIN
When it is the wrong tool
- You need the money this week. Underwriting a term loan takes longer than an advance, and the partner sets the pace
- The purchase is a truck or a machine. Equipment financing prices it as collateral, and is usually cheaper for that
- The business is very new with thin records. A line or an advance is usually the earlier shape; ask for the term loan when the history exists
- You are covering a shortfall that is not going to reverse. A fixed payment on top of a loss makes the loss bigger
Questions
The ones owners actually ask.
Still stuck? The guides go further:
How does a small business term loan work?
A partner sends one sum, less any origination fee, and you repay it in equal monthly payments over a fixed term at a rate set at the start. The payment does not move, so you know the outflow for every month on day one. It is credit, underwritten on trading history, deposits and the owner’s credit, which is why it is usually cheaper than an advance and slower to arrange. Put your own numbers through the calculator.
Is a term loan the same as a line of credit?
No. A term loan arrives once and is repaid on a fixed schedule. A line is a limit you draw on repeatedly and pay for as you use it. If the need is one purchase, the loan; if the need comes and goes, the line.
Will applying pull my credit?
Not with me. The form on this page is information, not an application, and I do not run credit. A funding partner may run credit as part of its own underwriting, and it will tell you when it does.
What is an origination fee?
A percentage of the loan taken out before it lands. Borrow $75,000 with a 3% fee and $72,750 arrives, but the payments are on the full $75,000. An illustration, not a quote. Ask what lands, not just what the rate is.
Can I pay it off early?
Sometimes for free, sometimes with a penalty, and it is in the contract either way. If you might, ask before you sign, and get the answer in writing.
How long does it take?
That is the partner’s call, not mine, and a term loan is usually a longer read than an advance. What I can say is what makes it slower: missing bank statements, no tax returns, no EIN, and deposits a partner cannot match to the business.
Do I need an EIN?
Almost always. It is free from the IRS and takes about ten minutes online. I wrote a short guide on getting one.
Get funding options
Tell me about the business.
One form covers every shape on the shelf. Tell me about the business and roughly how much you're after; partners who work with businesses like yours take it from there. About two minutes, no credit pull from me.