How to Use a Term Loan for Business Growth
Running and growing a business takes capital — sometimes more than you have on hand. Maybe you’re ready to expand, upgrade equipment, or simply keep cash flow steady.
That’s where a business term loan can help. It gives you a lump sum of funds that you can use for almost any business need and repay over time through predictable payments.
In this guide, we’ll cover what a term loan for business is, its key benefits, and how it can help you achieve your next business milestone.
What Is a Term Loan for Business?
A business term loan is when a lender gives a borrower a lump sum that’s paid back with interest over a defined period of time (or term). Repayments are made at regular intervals, usually weekly or monthly. Term loans are available through banks, credit unions, online lenders, and the Small Business Administration’s lending partners.
What Are the Benefits of Term Loans?
There are multiple benefits of term loans compared to other business financing options, including:
Predictable payments: Since these business loans have a set term, you’ll know exactly how long it will take to pay them off and when your payments will be due. Knowing what to expect upfront lets you budget for the expense and forecast cash flow.
Higher loan amounts: Small business owners often apply for a term loan when they need to invest in a growth opportunity, buy commercial real estate, or make other large purchases. These types of expenses require a large sum that usually exceeds available cash and business credit card limits. With a term loan, you might be able to get up to $5 million — depending on the lender, term length, and the eligibility requirements.
Longer time horizons: Term loans are available in a variety of term lengths, from short-term loans of up to two years to longer terms of 10, 20, or 25 years. This gives businesses the flexibility to match repayment terms to their business needs, goals, and cash flow.
Credit-building: When managed responsibly, a term loan can strengthen your business credit profile. Consistently making on-time payments demonstrates reliability to lenders, which can improve your credit score and increase your chances of securing additional financing in the future.
What Can I Use a Business Term Loan For?
Some lenders put restrictions on what a business term loan can be used for, but in general, there’s a lot of flexibility when it comes to use cases. Here are six ways you can use the funds from a loan.
1. Buy Equipment
Many businesses need to invest in machinery and equipment to do their work, and depending on the industry, it can be quite expensive. For example, if a construction company needs to buy an excavator, it can cost anywhere from $20,000 to $500,000 — and that’s just one piece of machinery. For companies outfitting their operations with various equipment, the expenses can quickly add up. With a term loan, you can get the financing you need and spread the cost over a couple of years or more.
2. Invest in Growth or Expansion
Are you ready to open another location? Do you want to upgrade your production capabilities? Is it time to invest in R&D? A term loan can help you fund all these growth opportunities and more. You’ll get the capital you need upfront and repay it gradually over time. It might even give you time to see returns from your investments and use those returns to pay down the loan.
3. Cover Operational Expenses
When you’re short on working capital, you can borrow money to cover day-to-day expenses, like payroll, rent, utilities, inventory, and supplies. Look for a short-term loan with a 12- to 24-month repayment period. You can often procure these loans more quickly or get smaller loan amounts.
For example, with Backd’s Business Term Loan,* you can borrow between $50,000 and $1.5 million with terms extending up to 24 months. It only takes a few minutes to apply,** and you could receive an offer in as little as 6 hours.***
4. Purchase Real Estate
A term loan can provide the funds you need to purchase, build, or improve land, existing buildings, or new facilities. Talk to your lender about occupancy requirements. Some loan programs will require your business to occupy at least 51% of a building.
5. Consolidate or Refinance Debt
Whether you have another loan with unfavorable terms or multiple debt facilities, a term loan can help you refinance or consolidate the debt. When you refinance, you can extend your term length and secure a lower interest rate.
The goal of consolidation is to combine all your debt into a single loan. This lets you corral multiple payment schedules into one monthly payment. Depending on the terms of your new loan, you might be able to benefit from a longer repayment term or a lower interest rate, like you would with a refinance.
6. Make Improvements to Your Office or Establishment
Is it time for a renovation or some upgrades? Maybe you’re a cafe owner who’s looking to refresh your seating area to make it a more comfortable meeting spot or to create space for local musician spotlights on the weekends.
Or perhaps you're a small business owner who wants to give your employees a more modern work environment with standing desks, ergonomic chairs, and flex space for collaboration.
A term loan can help you make it happen, so you can invest in the upgrades now without the hit to your cash flow all at once.
Business Term Loan FAQs
Still have some questions? Here are answers to other common queries businesses have about term loans.
What’s a Typical Term Loan Interest Rate?
The average interest rate for a traditional bank term loan is 6.6%-11.5%, as of October 2025. However, your specific interest rate offer will depend on a number of factors, including:
The lender
Your creditworthiness
Your business financials
The amount and length of the loan
Market conditions
How Long Are Repayment Schedules?
The length of a term loan’s repayment schedule depends on the lender, the loan amount, and what the loan is being used for. For example, Backd’s Business Term Loan offers flexible terms of up to 24 months, while an SBA 504 loan used for commercial real estate has a term length of 25 years.
Can Startups Qualify for a Term Loan?
It can be challenging for a startup to qualify for a term loan, as many loan options require a certain number of months or years in business. However, there might be lending opportunities for certain types of businesses.
For example, community development financial institutions (CDFIs) and credit unions sometimes provide small business loans and funding to startups. In addition, many medical practice loans have business startup or acquisition financing options.
Fuel Your Growth With the Right Financing
A business term loan can be a powerful tool for financing growth, managing expenses, and keeping your operations running smoothly. With flexible terms, predictable payments, and access to larger loan amounts, it gives your business the stability and capital needed to take the next step.
Backd’s Business Term Loan offers up to $1.5 million, terms of up to 24 months, and a simple online application process. Eligibility requirements include:
$100,000 in monthly revenue
A 650+ credit score
Established business credit
Based in the U.S. with a brick-and-mortar address
Been in business for one year
Apply now and start working toward your next business goal.
*Loans are decisioned and funded by one of Backd's lender partner banks.
**Your application, including the amount, cost, and approval, is subject to review and is not guaranteed. Terms and conditions subject to change without prior disclosure or notice.
***Decisions and funding may take additional time and not be same-day. Additional information may be required. Time to receive funds varies based upon your financial institution's receiving schedule and operating hours.
