A business term loan is what most small business owners think of when they hear the words “small business loan.” The repayment terms and fee structure are straightforward. Borrowers receive this money and agree to pay it back in regularly scheduled payments over a set period. The period is known as a loan term. You usually make monthly fixed payments for a set repayment term.

In addition to the loan amount, known as the principal, borrowers agree to pay interest, which is the fee lenders charge for borrowing that money. The percentage rate determines the amount of your payments. This percentage also determines the total amount you’ll repay over the loan term.

Business term loans come with fixed interest rates or variable rates. A fixed interest rate means lenders won’t change the rate during the term, while variable rates usually change with the WSJ Prime Rate. Many small business owners prefer the stability of fixed interest rate business loans.

Small business term loans generally carry lower costs and higher borrowing amounts than other small business financing products. However, they are also the hardest to qualify for. SBA Loans (Small Business Administration) are prime examples of long-term loans with challenging qualification requirements.