Bank and credit union term loans
A lump sum from a bank or credit union, repaid in fixed installments over an agreed term, usually one to five years. Usually cheaper than online lenders, but slower, and usually secured on assets with a personal guarantee.
- Secured on assets
- Personal guarantee likely
How it works
You borrow a set amount and repay it, with interest, in regular payments over a fixed term. The FDIC describes long-term business installment loans as typically running 12 to 60 months with fixed monthly payments, at rates that "may range widely, such as from 5% to 15%," usually secured on collateral such as equipment bought with the loan. Shorter loans of under a year exist too, usually at higher rates.
How lenders decide: banks and credit unions look at the "five Cs": character (your record of repaying debts), capacity (whether cash flow can cover the payments), capital (cash and assets to fall back on), collateral (assets pledged, such as equipment, inventory or real estate), and conditions (the market, your industry and what the loan is for). For smaller businesses they often look at the owners too, including personal credit reports and personal assets that could be pledged.
What to bring: a business plan, financial statements, business (and often personal) tax returns, credit reports, documents on what the loan will pay for, such as quotes or a purchase agreement, and details of any collateral.
If a bank says no: the lender must tell you why, or how to ask why (see below). The SBA suggests looking at SBA-guaranteed loans, through its Lender Match tool, if a bank thinks your business is too risky to lend to on its own.
Federal rules: business loans are not covered by the federal Truth in Lending rules (Regulation Z), so federal law does not require the lender to show an annual percentage rate. State commercial financing disclosure laws generally exempt banks and credit unions too. Ask for the rate, every fee and the total cost in writing, and compare offers.
Upsides and downsides
Upsides
- Usually cheaper than online lenders or sales-based finance
- Fixed payments make budgeting easier
- Builds a borrowing record with your bank
Downsides
- Harder to get for new businesses, or without collateral
- More paperwork and a slower decision than online lenders
- Federal law does not require an APR, so costs can be hard to compare
Risks
- Collateral can be taken if the business cannot repay
- A personal guarantee puts your own assets at risk
- With a variable rate, payments rise when market rates rise
What it costs
- How it is priced
- Interest at a fixed or variable rate set by the lender, based on how creditworthy it thinks the business is
- Typical range
- The FDIC gives "5% to 15%" as an example range for long-term business installment loans
- Costs that are easy to miss
- Arrangement or closing fees, and appraisals of any collateral
- Fees or penalties for repaying early, if the agreement has them
- Covenants, such as keeping minimum cash or limits on other borrowing
Set by the lender from your cash flow, collateral and credit.
Have a quote? True cost of a loan: work out the APR and total cost
Does it fit?
Could fit when
- Your business is established and profitable, and needs money for a set purpose
- You need money for equipment, property or buying a business, and have assets to offer as security
Unlikely to fit when
- Your business has traded for less than two years
- The business is making a loss
- You need the money within days
Who can use it
- Business types: Sole proprietorship, Partnership, LLC, S corporation, C corporation, Benefit corporation, Cooperative, Nonprofit
- Usually needs a profitable business
- Lenders look for a trading record, cash flow that covers the payments, and collateral
- Owners of smaller businesses are often asked for a personal guarantee and personal credit history
Am I ready?
What a provider is likely to ask for. Tick what you have. Your ticks stay in this browser and nothing is stored. Checklist for all bank and mainstream debt
0%
0 of 6 ticked
- Financial statements
- Business and personal tax returns
- What the money is for
Regulation and protections
Regulators: Federal Deposit Insurance Corporation (FDIC); Office of the Comptroller of the Currency (OCC); Federal Reserve; National Credit Union Administration (NCUA); Consumer Financial Protection Bureau (CFPB).
Who runs it: Private providers, nationwide.
Banks and credit unions are supervised by federal or state regulators. The Equal Credit Opportunity Act (Regulation B) covers business credit: if your business had sales of $1 million or less last year, the lender must tell you its decision within 30 days of a complete application and, if it turns you down, give you the reasons or tell you how to ask for them.
Federal Truth in Lending rules (Regulation Z) do not cover business loans.
Types of provider: Banks; Credit unions; Community development financial institutions.
Also consider
What has changed
No changes since this page was published. It was last checked against its sources on October 17, 2026.
Sources
- FDIC: Money Smart for Small Business, Module 5: Small Business Financing (participant guide) · checked October 20, 2026
- SBA: Plan your business (fund your business: small business loans and Lender Match) · checked October 17, 2026
- 12 CFR 1002.9 (Regulation B): notifications, including to business credit applicants · checked October 17, 2026
- 12 CFR 1026.3 (Regulation Z): exempt transactions, including business credit · checked October 17, 2026
Something wrong or out of date?
Every fact here comes from a source, and rules and limits change. Email what looks wrong to data@fundladder.uk and, if you can, where you saw the right information. We use your email only to check the correction and reply. Privacy