AFO · Glossary
Term Loan
A loan drawn in a single advance (or a defined schedule of draws) with a fixed amortization and maturity.
What this term means in practice
A term loan funds a defined purpose — an acquisition, an equipment purchase, a real-estate buy, a large capex project — with a known amortization schedule and a known maturity. Unlike a revolver, repaid principal can't be redrawn; once paid down, that capacity is gone.
Term loans come in different amortization profiles. Fully-amortising loans pay principal evenly to maturity (think 25-year mortgage). Balloon term loans amortize on a longer schedule (say 25 years) but mature earlier (say 5 or 7 years), with the remaining principal due as a balloon at maturity — a structure that lowers the current cash drain at the cost of a refinancing trigger. Bullet loans pay no principal during the term and refinance the full balance at maturity.
Rate structure matters: fixed-rate term loans lock the interest cost for the term, useful when rates are expected to rise; variable-rate term loans price off Prime, useful when rates are expected to fall. Prepayment penalties — the cost of paying down or refinancing the loan early — are the negotiated piece that determines whether a future refinance is economically rational.
Where this matters in the catalog
Programs that turn on Term Loan.
CSBFP — Canada Small Business Financing Program
Government-backed term loan for equipment, leasehold, and real property. Up to $1.15M.
Conventional Senior Term Loan or Revolver
Cash-flow-underwritten facility from a chartered bank, credit union, or Schedule II lender.
Equipment Finance / Leasing
Equipment-specific term loan or lease at 75–90% LTV on the equipment.
Where the definition meets your situation.
The CPA can walk through how this concept applies to your business in twenty minutes — what providers will ask, where the negotiation matters, what the trade-offs actually look like in your numbers.