A business term loan is a lump sum repaid in fixed installments over a set term, used for expansions, build-outs, larger purchases and similar one-time projects. Glenford Financial, a small-business funding broker in San Angelo, TX, helps Tom Green County owners match the term to the project and connects them with lending partners, which approve or decline and set rates and terms.
| Built for | Single projects with a firm price |
|---|---|
| Funds | One lump sum at closing |
| Repayment | Fixed installments over a set term, usually monthly |
| Watch for | Balloon payments, covenants and prepayment terms |
| Who decides | The lending partner, not Glenford Financial |
| Office | 15 W Beauregard Ave, San Angelo, TX 76903 · (325) 241-0824 |
Lump sum in, fixed payments out
The partner advances a fixed amount, and the business repays it, with interest, in scheduled installments over an agreed number of months or years. Most term loans amortize: each payment covers that period's interest and part of the principal, so the balance falls with every payment. The term is usually set with the purpose in mind, shorter for a vehicle or computer system, longer for a build-out or an acquisition of business assets.
Term loans suit projects with a start, an end and a price: expanding into the space next door, finishing out a leased unit, adding a second location, or replacing several pieces of equipment at once. For one machine, equipment financing may be the more direct route, because the machine secures its own financing.
Expansion projects
Can you get a business loan to expand? Partners do fund expansions, but they look harder at them than at routine purchases, because repayment depends on revenue that does not exist yet. A written plan helps: what the expansion costs, when it starts earning, and how the existing business carries the payments until it does. How to write a business plan for a loan application walks through that document section by section.
Small firms carry most of this risk personally. In 2023, 85.3 percent of Tom Green County's 2,963 employer establishments had fewer than 20 employees (U.S. Census Bureau, County Business Patterns 2023). At that size, partners commonly ask owners for a personal guarantee, so an expansion loan is a household decision as well as a business one.
Reading the payment schedule
Ask for the amortization schedule before you sign. It lists every payment and splits each into interest and principal. Interest takes most of each early payment, principal most of each later one. The schedule answers practical questions: what you would still owe after two years, how much interest the whole loan costs, and whether the final payment matches the others. You can test a payment on your own numbers with the startup loan payment calculator.
Balloon payments
A balloon payment is a large final payment left over because the regular payments were set as if the loan ran longer than it does. Balloons keep monthly payments lower but leave a lump sum due at the end, which the business must pay from cash or by refinancing. If a term sheet shows a balloon, plan now for how it will be met, and ask what happens if refinancing is not available when it falls due.
Covenants and other conditions
What is a loan covenant? A promise in the loan agreement that the business will do, or avoid doing, certain things while the loan is outstanding. Common examples are sending financial statements on a schedule, keeping a minimum ratio of cash flow to debt payments, keeping insurance on collateral, and not taking on more debt without consent. Breaking a covenant can be treated as a default even if every payment is on time, so read them as carefully as the price.
Paying the loan off early
Often, but the cost of doing so varies. Some agreements charge a prepayment penalty; some calculate interest up front, so paying early saves little or nothing; others reduce interest when the balance falls. Ask the partner directly how an early payoff would be calculated, and get the answer in the agreement, not just in conversation.
Documents for a term loan request
- The project's cost, supported by quotes, a contract or a lease
- Two or three years of business tax returns and recent financial statements, if you have them
- Recent business bank statements
- A schedule of existing debts
- Proof the business is in good standing in Texas; see what a partner checks in your Texas tax records
New to borrowing in Texas? The Texas business loan checklist covers the records to line up first.
When a line beats a term loan
A term loan suits one project paid for once. A line of credit suits costs that recur at different sizes, because you draw only what you need and repaid amounts become available again. Some businesses use both: a term loan for the build-out and a line for the uneven months that follow.
By Glenford Financial · Updated