Term loans may provide for periodic payments, most often monthly or quarterly. Interest will always be required to be paid at intervals, usually monthly. Generally, the longer the term of the loan, and the less frequent the payments, the higher will be the interest rate. Interest rates can be floating rates, varying with the bank's prime rate, or fixed for the term. Expect to pay a penalty if a fixed rate loan is paid before its due date.
Commercial mortgages are term loans secured by real estate.
Businesses usually take out commercial mortgages to buy real property or construct or improve buildings. Mortgages are typically written as a percentage of the appraised value of the property, usually 60-80 percent. Commercial mortgages are often written for longer durations than other term loans. A commercial mortgage has longer lead times and higher up-front costs than other forms of financing because of the need for appraisals, title searches, title insurance, environmental site assessments and the like. Interest rates are comparable to conventional term loans.