A term loan provides a fixed amount of money upfront, which must be repaid over a predetermined period, usually with fixed payments. In contrast, a line of credit allows businesses to borrow up to a certain limit as needed, with interest charged only on the amount used. Term loans are suited for large, one-time expenses, while lines of credit are ideal for ongoing, flexible financial needs.

Lenders typically assess factors such as the business’s annual revenue, time in operation, and creditworthiness. Many lenders prefer businesses with at least 1-2 years of history and consistent revenue streams. Personal and business credit scores, a strong business plan, and financial statements can also improve approval chances.

Interest rates for business term loans vary depending on the lender, the borrower’s creditworthiness, and the loan’s term length. Traditional banks may offer rates as low as 5% to 10%, while online or alternative lenders may charge higher rates, typically ranging from 10% to 30%. Borrowers with stronger credit profiles and established businesses often secure lower rates.