{"id":58,"date":"2026-03-27T11:40:31","date_gmt":"2026-03-27T11:40:31","guid":{"rendered":"https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/?p=58"},"modified":"2026-03-27T11:59:05","modified_gmt":"2026-03-27T11:59:05","slug":"what-are-business-term-loans-and-how-to-get-the-best-deal","status":"publish","type":"post","link":"https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/what-are-business-term-loans-and-how-to-get-the-best-deal\/","title":{"rendered":"What Are Business Term Loans and How to Get the Best Deal?"},"content":{"rendered":"\n<p>Did you have&nbsp;a hard time&nbsp;starting a business? It may&nbsp;be, but&nbsp;maintaining it successfully is even harder. Why is it harder? Because you need sufficient funds to manage small or large expenses to keep your business growing.&nbsp;&nbsp;<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"502\" height=\"726\" src=\"https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/wp-content\/uploads\/2026\/03\/image-7.png\" alt=\"\" class=\"wp-image-60\" srcset=\"https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/wp-content\/uploads\/2026\/03\/image-7.png 502w, https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/wp-content\/uploads\/2026\/03\/image-7-207x300.png 207w, https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/wp-content\/uploads\/2026\/03\/image-7-160x232.png 160w, https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/wp-content\/uploads\/2026\/03\/image-7-48x70.png 48w, https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/wp-content\/uploads\/2026\/03\/image-7-277x400.png 277w\" sizes=\"auto, (max-width: 502px) 100vw, 502px\" \/><\/figure>\n<\/div>\n\n\n<p>There are more problems for young businesses. They often lack sufficient revenue to cover their expenses. This is why <a href=\"https:\/\/www.thebusinessfunds.co.uk\/loans\/business-loans\">business loans<\/a> are useful for balancing your new venture. Business term loans can be a tool for monitoring regular and irregular expenses and maintaining smooth business operations.<\/p>\n\n\n\n<p>In this guide, we have explained term loans, including their types, benefits, how they can help if you struggle to access funds, and how to apply.<\/p>\n\n\n\n<h1 class=\"wp-block-heading\"><strong>What are business term loans in the UK?<\/strong><\/h1>\n\n\n\n<p>Commercial term loans are a type of financing in which a business qualifies for a loan amount for a set period from a lending institution, such as a bank or an alternative lender. The loan is settled on an interest rate, and it can be used as <a href=\"https:\/\/www.thebusinessfunds.co.uk\/loans\/working-capital-loans\">working capital<\/a> to run your venture with no hassle.<\/p>\n\n\n\n<p><strong>Features of business term loans are:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Principal amount and interest rate<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Once you receive the borrowing amount, you have to start repaying the loan from the next month. You will make monthly repayments that include a principal and interest payment.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Fixed or variable interest rates<\/strong><\/li>\n<\/ul>\n\n\n\n<p>The business term loan rates you pay are either fixed or flexible. A fixed rate will remain the same during the entire loan term. On the other hand, variable interest rates fluctuate with market rates from time to time.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Flexible repayment term<\/strong><\/li>\n<\/ul>\n\n\n\n<p>There are variations in the business loan repayment terms. Lenders generally provide from 12 months to 10 years. Some loan providers even keep the term longer than that.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Secured or unsecured loans<\/strong><\/li>\n<\/ul>\n\n\n\n<p><a href=\"https:\/\/www.thebusinessfunds.co.uk\/loans\/secured-business-loans\">Secured business loans<\/a> are arrangements in which the borrower must keep an asset to obtain a loan. The lender can repossess the asset if you do not repay the loan. <a href=\"https:\/\/www.thebusinessfunds.co.uk\/loans\/unsecured-business-loans\">Unsecured business loans<\/a> are exempt from such arrangements because they do not require collateral. However, these carry higher interest rates because they pose a risk to the lender.<\/p>\n\n\n\n<p><strong>An example of a business term loan<\/strong><\/p>\n\n\n\n<p>Suppose a <a href=\"https:\/\/www.thebusinessfunds.co.uk\/industries\/transport-and-logistic-business-loans\">transport business<\/a> is looking to borrow \u00a350,000 from a lender. It needs additional funding to purchase vehicles to reach new locations in the UK. The term loan agreement says:<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Loan Amount<\/strong><\/td><td><strong>\u00a350,000<\/strong><\/td><\/tr><tr><td><strong>Loan Term<\/strong><\/td><td>60 Months<\/td><\/tr><tr><td><strong>Interest Rate<\/strong><\/td><td>7%<\/td><\/tr><tr><td><strong>Monthly Payment<\/strong><\/td><td>\u00a3990<\/td><\/tr><tr><td><strong>Average Monthly Interest<\/strong><\/td><td>\u00a3157<\/td><\/tr><tr><td><strong>Total Interest Paid<\/strong><\/td><td>\u00a39,404<\/td><\/tr><tr><td><strong>Total Loan Cost<\/strong><\/td><td>\u00a359,404<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong>Suggestion: <\/strong><em>Do not waste too much time in estimating the loan cost. Use the business term loan calculator to get the actual cost of borrowing<\/em><em>.<\/em><\/p>\n\n\n\n<h1 class=\"wp-block-heading\"><strong>What are the uses of business term loans?<\/strong><\/h1>\n\n\n\n<p>Do you want a loan for your business? Considering term loans can be useful given their variety of uses. You can use the loans for various business purposes, including:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Marketing and advertising<\/li>\n\n\n\n<li>Locating a new branch<\/li>\n\n\n\n<li>Renovation to the current office space<\/li>\n\n\n\n<li>Purchasing <a href=\"https:\/\/www.thebusinessfunds.co.uk\/loans\/inventory-finance\">inventory<\/a><\/li>\n\n\n\n<li>Hiring new staff<\/li>\n\n\n\n<li>Buying or repairing equipment and machinery<\/li>\n\n\n\n<li>Paying urgent bills<\/li>\n<\/ul>\n\n\n\n<p>Some lenders also allow you to use funds for <a href=\"https:\/\/www.thebusinessfunds.co.uk\/loans\/debt-financing-uk\">business debt finance in the UK<\/a>.<\/p>\n\n\n\n<h1 class=\"wp-block-heading\"><strong>What are the types of term loans for business?<\/strong><\/h1>\n\n\n\n<p>The types of business loans for young entrepreneurs in the UK are primarily defined by the repayment terms, i.e. short-term, medium-term and long-term loans. Each of these options has different features for varied business needs. Let us make the difference between them more specific.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Types of Term Loans<\/strong><\/td><td><strong>Loan Repayment Term<\/strong><\/td><td><strong>Interest rate range<\/strong><\/td><td><strong>Credit Score Criteria<\/strong><\/td><td><strong>Best Use<\/strong><\/td><\/tr><tr><td><strong><a href=\"https:\/\/www.thebusinessfunds.co.uk\/business\/short-term-business-loans\">Short-term business loans<\/a><\/strong><strong> <\/strong><strong><\/strong><\/td><td>1-2 years<\/td><td>Higher<\/td><td>All credit scores accepted<\/td><td>To make a quick purchase or manage a financial emergency &nbsp;<\/td><\/tr><tr><td><strong>Medium-term business loans<\/strong><\/td><td>2-5 years<\/td><td>Lower than a small business loan<\/td><td>Good credit needed<\/td><td>To arrange a larger sum of money for purchasing equipment or other assets &nbsp;<\/td><\/tr><tr><td><strong><a href=\"https:\/\/www.thebusinessfunds.co.uk\/business\/long-term-business-loans\">Long-term business loans<\/a><\/strong><strong> <\/strong><strong><\/strong><\/td><td>5-10 years or longer<\/td><td>Lower interest rates<\/td><td>Excellent credit required<\/td><td>To manage major business expenses like buying a commercial property or doing large-scale operations &nbsp;<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h1 class=\"wp-block-heading\"><strong>What are the advantages and disadvantages of business term loans?<\/strong><\/h1>\n\n\n\n<p>Like any other business loan type, term loans have both advantages and disadvantages to consider.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Advantages<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Fixed loan repayment term<\/strong>: With these loans, you have a clear idea of how much payment will go each month. It allows you to make a budget smoothly with no disturbance to your cash flow.<\/li>\n\n\n\n<li><strong>Varieties in loan terms<\/strong>: You have a nice choice between a small-business loan term and long-term financing for your business.<\/li>\n\n\n\n<li><strong>Improve your business credit score<\/strong>: If you repay the loan in full and on time, it will help in positively building your business credit score. You can easily borrow more funds in the future.<\/li>\n\n\n\n<li><strong>Loans for any purpose<\/strong>: A term loan brings flexibility to use the borrowed sum. It means you can use money to fulfil any business purpose (mentioned above).<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Disadvantages<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Strict qualifying criteria: <\/strong>You need to pass strict criteria to qualify for a business loan term, particularly if you have a poor credit history.<\/li>\n\n\n\n<li><strong>Collateral at risk<\/strong>: Sometimes, term loans need an asset to secure the loan amount. Losing the asset can be a possibility if you fail to repay the loan on time.<\/li>\n\n\n\n<li><strong>Minimum flexibility on repayment<\/strong>: Suppose you cannot make a payment in one month. Lenders hardly allow you to make that pending payment next month.<\/li>\n<\/ul>\n\n\n\n<h1 class=\"wp-block-heading\"><strong>Tips to choose the right commercial term loans<\/strong><\/h1>\n\n\n\n<p>It is fine that you have decided to apply for a business loan term. Is your business ready for this? If not, then consider these things before applying:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>What is the purpose of taking a loan?<\/strong><\/li>\n<\/ul>\n\n\n\n<p>You need to be specific in the loan purpose, such as whether you need funds to pay bills or to buy fresh premises.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>What is the interest rate that the lender is offering?<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Before signing the loan contract, you should evaluate how much interest you can afford in total. Also, check if fixed or variable interest rates are available.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Are you getting repayments affordable to make?<\/strong><\/li>\n<\/ul>\n\n\n\n<p>It is very important to have an affordable loan. Whatever the amount you borrow, you need to repay it on time. For best results, use the business term loan calculator to get an estimate.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Do you need an unsecured or secured business loan?<\/strong><\/li>\n<\/ul>\n\n\n\n<p>If you need a large amount and have an asset to secure, you can opt for a collateral loan. Otherwise, unsecured loans are suitable for smaller amounts and shorter periods.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>What are the loan fees involved?<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Some lenders charge upfront fees or an arrangement fee. While some also imply early repayment fees. Check every fee given in the business loan quote.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>What is your personal credit score?<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Your personal credit score can determine your qualification for the loan. If your credit score is not perfect, you will face a higher interest rate. You can also consider other options to improve your score.<\/p>\n\n\n\n<h1 class=\"wp-block-heading\"><strong>How to be eligible for a business term loan?<\/strong><\/h1>\n\n\n\n<p>Generally, any business can qualify for a term loan if it uses it for the right purpose and right intention. With a loan, you also have the opportunity to earn a sufficient return.<\/p>\n\n\n\n<p>However, qualifying criteria may vary among the lenders. There are some standard conditions that they follow. These include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Strong business credit history to illustrate the financial credibility<\/li>\n\n\n\n<li>Unsettled debts give an idea of how much debt you have, determining your financial obligations<\/li>\n\n\n\n<li>Steady cash flow to show that your business has the capacity to grow<\/li>\n<\/ul>\n\n\n\n<p>In addition to these conditions, some lending institutions may require collateral, such as property or equipment, to secure a loan.<\/p>\n\n\n\n<p>If you are still not sure about your term loan eligibility, you should talk to Thebusinessfunds about next steps. Our loan experts guide you on which loan is ideal for your business circumstances and support you throughout the application process.<\/p>\n\n\n\n<h1 class=\"wp-block-heading\"><strong>How to apply for a business loan for a specific term?<\/strong><\/h1>\n\n\n\n<p>\u200dHere are the standard steps to apply for a business term loan in the UK:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Choose the lender <\/strong><\/li>\n<\/ul>\n\n\n\n<p>You have plenty of options for applying for a loan. Banks, credit unions, or online lenders are offering term loans at specific rates. Compare them with a responsible <a href=\"https:\/\/www.thebusinessfunds.co.uk\/\">business loan broker<\/a> like Thebusinessfunds and choose the one that best matches your business funding requirements.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Decide the loan requirements<\/strong><\/li>\n<\/ul>\n\n\n\n<p>When looking for a loan, be clear about what you need, the loan term, and the type of loan you require. Share your business roadmap or business plan with us so that our experts can guide you.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Keep credit score and financial statements ready<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Lenders want to know your personal and business credit scores. Therefore, you should keep and share their updated report. Also, prepare your financials, such as annual revenue, tax receipts, cash flow, etc.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Collect all documents needed<\/strong><\/li>\n<\/ul>\n\n\n\n<p>If you need a business loan with quick approval, gather all required documents, such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Business license<\/li>\n\n\n\n<li>Business tax returns<\/li>\n\n\n\n<li>Financial statements of the past two years<\/li>\n\n\n\n<li>Personal financial statements<\/li>\n\n\n\n<li>A comprehensive business plan<\/li>\n\n\n\n<li>An updated credit report<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Apply online, receive approval and fund transfer<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Submit an online loan application at the website of your lending institution. It will save you time and let you get an instant decision on a business term loan. Banks may take time to disburse the funds. For fast funding, you can consider alternative online lenders.<\/p>\n\n\n\n<h1 class=\"wp-block-heading\"><strong>Frequently Asked Questions (FAQs)<\/strong><\/h1>\n\n\n\n<p><strong>Can I get long-term business loans for bad credit?<\/strong><\/p>\n\n\n\n<p>Although long-term business loans favour mostly those with excellent credit scores. Still, a few online business loan lenders in the UK provide longer loan tenures despite poor credit. However, the interest rate is high.<\/p>\n\n\n\n<p><strong>Does applying for a term loan affect your credit score?<\/strong><\/p>\n\n\n\n<p>Yes, if you do not pay the loan on time, it will affect your credit score. Therefore, applying for an affordable loan is crucial. However, if you repay the loan in full with no missed payments, it will advance your credit score.<\/p>\n\n\n\n<p><strong>Can I avail of an unsecured business loan with a guarantor?<\/strong><strong><\/strong><\/p>\n\n\n\n<p>Yes, you can apply for an unsecured <a href=\"https:\/\/www.thebusinessfunds.co.uk\/blog\/what-are-the-main-benefits-of-using-a-guarantor-for-a-business-loan\/\">business loan with a guarantor<\/a>. It will allow you to get a business loan for 100k or more. The guarantor should have a positive credit score and a steady income. Some lenders also require the guarantor to have equity in your business.<\/p>\n\n\n\n<p><strong>How long is a business loan term?<\/strong><\/p>\n\n\n\n<p>You can get a business loan with a term of up to 10 years. A few lending institutions may also offer terms of more than 10 years, but a personal guarantee becomes mandatory.<\/p>\n\n\n\n<p>At Thebusinessfunds, we offer a reliable <a href=\"https:\/\/www.thebusinessfunds.co.uk\/apply-now\">online loan comparison<\/a> platform where you can compare the lenders to get the best business term loans to grow your business.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Did you have&nbsp;a hard time&nbsp;starting a business? It may&nbsp;be, but&nbsp;maintaining it successfully is even harder. Why is it harder? Because you need sufficient funds to manage small or large expenses to keep your business growing.&nbsp;&nbsp; There are more problems for young businesses. They often lack sufficient revenue to cover their expenses. This is why business [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":61,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22],"tags":[15,24,23],"class_list":["post-58","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-term-loans","tag-business-finance","tag-business-loans","tag-business-term-loans","entry"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/wp-json\/wp\/v2\/posts\/58","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/wp-json\/wp\/v2\/comments?post=58"}],"version-history":[{"count":5,"href":"https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/wp-json\/wp\/v2\/posts\/58\/revisions"}],"predecessor-version":[{"id":69,"href":"https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/wp-json\/wp\/v2\/posts\/58\/revisions\/69"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/wp-json\/wp\/v2\/media\/61"}],"wp:attachment":[{"href":"https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/wp-json\/wp\/v2\/media?parent=58"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/wp-json\/wp\/v2\/categories?post=58"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thebusinessfunds.co.uk\/knowledge-base\/wp-json\/wp\/v2\/tags?post=58"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}