Term Length
The term length of a loan refers to the duration or time period over which the borrower is expected to repay the loan in full. It is the agreed-upon length of time between the start of the loan and when the final payment is due. The term length has a significant impact on the financial burden of the loan, including the repayment schedule and the total cost of borrowing.
Shorter loan terms usually come with higher monthly payments but lower total interest costs over the life of the loan. The aggressive repayment schedule can significantly impact cash flow.
Longer loan terms have lower monthly payments, but because interest is paid over a longer period, the total cost of borrowing is often higher. The longer repayment period provides more flexibility for businesses with tight or uneven cash flow.
RELATED: Short-Term Business Loans: Can Fast Financing Help Your Startup?
For amortizing loans, the term length determines how quickly the principal is repaid. A longer term means the principal is repaid more slowly, while a shorter term accelerates the principal repayment.
Interest-only loans or balloon loans may have shorter repayment terms, but a larger payment (or the remaining balance) is due at the end of the loan term.
Financial Glossary
Use Lighter Capital's glossary to understand common terms used in finance and investing, so you can build financial literacy and make informed decisions for your startup.
Term Length
The term length of a loan refers to the duration or time period over which the borrower is expected to repay the loan in full. It is the agreed-upon length of time between the start of the loan and when the final payment is due. The term length has a significant impact on the financial burden of the loan, including the repayment schedule and the total cost of borrowing.
Shorter loan terms usually come with higher monthly payments but lower total interest costs over the life of the loan. The aggressive repayment schedule can significantly impact cash flow.
Longer loan terms have lower monthly payments, but because interest is paid over a longer period, the total cost of borrowing is often higher. The longer repayment period provides more flexibility for businesses with tight or uneven cash flow.
RELATED: Short-Term Business Loans: Can Fast Financing Help Your Startup?
For amortizing loans, the term length determines how quickly the principal is repaid. A longer term means the principal is repaid more slowly, while a shorter term accelerates the principal repayment.
Interest-only loans or balloon loans may have shorter repayment terms, but a larger payment (or the remaining balance) is due at the end of the loan term.
For more than a decade, Lighter Capital has invested in helping early-stage tech startups succeed on their terms. Explore our small-but-mighty (and always expanding) library of founder resources to level-up your financial IQ, fine-tune your growth strategies, and lead your startup towards a lucrative exit.
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“When the time was right for us to make a move in the market, Lighter Capital was an easy way for us to get the growth funding we needed without diluting our control. Working with Lighter Capital has been a great experience.”
Mark Bania, Contractor Compliance CEO & Co-Founder
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Lighter Capital's non-dilutive financing provides startups with a quick upfront injection of growth capital based on the business's recurring revenue streams. That means you get to keep your equity and control of the business, and your loan payments are right-sized to what the business can support. Our financing also scales with you as you grow. Apply online to find out how much you may qualify for.
