Term Loan

How term loan works

Payments may repay both capital and interest, or use another stated profile such as interest-only payments with capital due later. The rate may be fixed or variable and early settlement may involve charges.

Practical UK business example

A wholesaler borrows for a warehouse improvement over five years and schedules repayments against expected cash generation, including a downside trading scenario.

Illustrative example only; not a finance quotation or a client case study.

Why it matters

A defined repayment plan makes the commitment easier to incorporate into budgets. The business needs to choose a term that fits the purpose and useful life of what it funds.

Limitations and common misconceptions

The same loan term can hide very different repayment profiles. Check whether capital reduces during the term and whether any final amount remains outstanding.

Discuss business borrowing to discuss how the structure relates to your business.