What is a Term Loan?
How Does a Term Loan Work?
Let's say Company XYZ wants to borrow $1 million to build a factory. It meets with its bank, ABC Bank, to negotiate the loan with quarterly payments and a 7% interest rate.
Term loans often mature within 10 years, but this is negotiable. They usually require collateral. Not all banks make term loans, and an existing relationship with a bank is usually helpful.