A term loan is a loan from a bank for a specific amount that has a specified repayment schedule and a fixed or floating interest rate. For example, many banks have term-loan programs that can offer small businesses the cash they need to operate from month to month. Often, a small business uses the cash from a term loan to purchase fixed assets such as equipment for its production process.A term loan is for equipment, real estate or working capital paid off between one and 25 years. The loan carries a fixed or variable interest rate, monthly or quarterly repayment schedule, and set maturity date. The loan requires collateral and a rigorous approval process to reduce the risk of repayment. A term loan is appropriate for an established small business with sound financial statements and a substantial down payment to minimize payment amounts and total loan cost.An intermediate-term loan runs less than three years, is paid in monthly installments from a companys cash flow and may have balloon payments. Repayment is tied to the useful life of the asset financed. A long-term loan runs for three to 25 years, is collateralized by a companys assets and requires monthly or quarterly payments from profits or cash flow. The loan limits other financial commitments the company may take on, including other debts, dividends or principals salaries, and can require an amount of profit to be set aside for loan repayment.A fixed-rate loan payment remains the same because the interest rate is constant; a variable-rate loan requires a different payment amount when the interest rate changes. A lender may establish an SBA loan with interest-only payments during a companys startup or expansion phase; the business then has time to generate income before making full loan payments. Balloon payments are not allowed on most SBA loans. The SBA charges the borrower a prepayment fee only if the loan has a maturity of 15 years or more and is prepaid in the first three years. Every loan is secured by all available business and personal assets until the recovery value equals the loan amount or until all assets are pledged as reasonably available.