Term loan

A term loan is a monetary loan that is repaid in regular installments over a fixed period of time. Term loans typically last between one and ten years, though maturities of up to 30 years are possible. Such loans accrue interest, which may be charged at a fixed or floating rate. Floating interest rates are commonly tied to benchmark rates such as Euribor, SOFR, or similar reference rates, and are often based on the borrower's credit rating.

Term loans are normally business loans and are in contrast to a line of credit or short term demand loans. Their longer repayment periods can be attractive to new or expanding enterprises, as borrowers may expect revenues and profitability to increase over time. Businesses often use term loans to raise capital for expansion, including increasing production capacity, acquiring equipment, or financing operational growth. Term loans may be issued as bank-syndicated debt or through the institutional loan market. Institutional term loans that trade on secondary markets are commonly referred to as Term Loan B. These facilities typically have maturities of around seven years and limited financial covenants. In U.S. law–governed loan transactions, they are generally classified as senior debt and are usually not subordinated to other indebtedness.