Annual Percentage Rate (APR)
The annualized cost of borrowing including interest and fees. The only standardized way to compare loan costs across products. A $50K loan repaid over 12 months with $5K in total interest and fees = 18.3% APR. Always ask for APR — not just the interest rate, which excludes origination fees.
Term Loan
A lump-sum loan repaid in fixed installments over a set period (1-25 years). Interest can be fixed or variable. Best for specific, one-time investments: equipment, expansion, acquisition. Online term loans: 3-36 months; bank term loans: 1-10 years; SBA: up to 25 years.
**Is a small business loan installment or revolving?** A term loan is **installment** credit: you receive the full amount once and repay it on a fixed schedule until the balance hits zero, and you cannot re-borrow what you have repaid without applying again. A business line of credit is the **revolving** kind: you draw, repay, and draw again up to a limit. Most products marketed simply as "small business loans" (bank term loans, SBA 7(a) and 504 loans, online term loans, equipment loans) are installment loans; lines of credit and business credit cards are revolving.
**Why the distinction matters:** installment loans usually carry lower rates and predictable payments, and they suit one-time purchases with a clear payback period. Revolving credit costs more per dollar drawn but only charges interest on what is outstanding, which suits recurring cash-flow gaps. On business credit reports, a paid-down installment loan builds payment history, while a revolving line also affects utilization.
**Typical term-loan structure:** principal + interest amortized monthly (sometimes weekly for online lenders); origination fee of roughly 1-5% deducted at funding; prepayment terms vary (some online lenders charge the full remaining interest regardless of early payoff, so read the note). See also: business line of credit, amortization, prepayment penalty.