Glossary · Trucking Finance
Term Loan.
Lump-sum business loan repaid over a fixed schedule with interest; the standard structure for equipment purchases and major capital expenditures.
What it is
A term loan is a lump-sum loan with a fixed repayment schedule, typically monthly. Interest can be fixed or variable. The loan can be secured (an equipment loan against a tractor) or unsecured (a working-capital term loan). Terms in commercial trucking commonly run 12–84 months. Principal and interest are amortized over the term, so each payment includes both — early payments are interest-heavy, later payments are principal-heavy.
A term loan differs from a line of credit: a term loan is a one-time draw with a set repayment schedule, while a line is revolving. It also differs from an MCA: a term loan has a true APR (a stated interest rate), while an MCA has a factor rate. SBA loans are a subset of term loans — government-backed, with longer terms and lower rates than conventional bank term loans, but slower to underwrite. Most equipment financing is structured as a term loan; most working capital is also term-loan structured.
Why it matters for trucking finance
Term loans are the financial primitive for big purchases — buy the truck, buy the trailer, buy the tools. The math is simple but small APR differences compound dramatically over 60–84 months. Running multiple stacked term loans creates fixed-cost rigidity: an owner-op with $4K/month in truck + trailer + working-capital payments has very little flex when revenue dips. Consolidating multiple term loans into one is sometimes cheaper but extends overall repayment.
Related terms
- Equipment Loan — Term loan secured by the financed vehicle (truck, trailer, or other equipment); standard structure for buying Class 8 tractors and trailers.
- Working Capital — Short-term unsecured business funding used to bridge cash-flow gaps, cover operating expenses, or capitalize on opportunities; APR typically 14–34%.
- SBA Loan (SBA) — Small Business Administration-guaranteed loan with longer terms (up to 10–25 years) and lower rates than conventional commercial loans.
Related Dispatched products
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