term loans

An ordinary term loan has a formal loan agreement in which the period of maturity is specified at more than one year, although repayment may be either in a lump sum or in periodic installments. Other types of business loans, however, may also be term loans, event though they appear superficially to be short-term loans with a maturity of less than one year. Such may be the case with bank credit extended under revolving credit or standby agreements. Even though the note may be drawn originally with a maturity as short as 90 days, the loan agreement may permit the borrower to renew the note at maturity so that the credit may remain on the books of the lending banks for period as long as two years or more.