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 $1,150,000.
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 to 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.