Term Loans and Unitranche Debt

Short answer: A term loan gives a business a lump sum repaid in fixed installments over a set period, used for expansion, hiring or one-time projects. Unitranche debt is a larger private credit facility that combines senior and subordinated debt into one loan, with one lender group, one agreement and one blended rate. NexGen arranges both, up to $20,000,000.

At a glance

Term loans: Lump sum, fixed payments, set term
Unitranche: Senior and subordinated debt in one facility
Best for: Growth, acquisitions, recapitalizations, refinancing
NexGen amounts: $10,000 to $20,000,000 across programs
Approval speed: Typically 1 to 24 hours for term programs; unitranche takes longer
Credit requirement: 650 minimum credit score

Some capital needs are ongoing, and a line of credit handles those well. Others are one-time and large: opening a second location, buying a competitor, buying out a partner, or replacing several expensive loans with one. Term loans cover these one-time moves for small and growing businesses. Unitranche debt, a tool from the private credit market, covers the larger end, where a business needs a substantial, flexible facility without juggling multiple lenders.

What is a term loan?

Short answer: A term loan is a fixed amount of capital paid out up front and repaid in regular installments, usually weekly or monthly, over a set term. It suits planned, one-time investments where you know the cost in advance: an expansion, a renovation, new hires, inventory for a big contract or consolidating higher-cost debt.

Term loans are predictable. You know the payment and the payoff date, which makes them easy to plan around. Short-term programs fund quickly and lean on recent revenue; longer-term programs offer lower payments but look more closely at financial statements and credit.

What is unitranche debt?

Short answer: Unitranche debt is a single loan that blends what would traditionally be two layers of financing, senior debt and subordinated (junior) debt, into one facility. The borrower signs one agreement, works with one lender or lender group and pays one blended interest rate, instead of negotiating separate senior and mezzanine loans.

What do senior and subordinated debt mean? Senior debt is repaid first if a business runs into trouble, so it carries lower risk and a lower rate. Subordinated debt is repaid after senior debt, so it carries more risk and a higher rate. A unitranche loan combines both into one facility with a single rate between the two.

How do term loans and unitranche debt work?

Short answer: For a term loan, lenders review revenue, time in business and credit, then fund a lump sum with a fixed repayment schedule. For unitranche, a private lender underwrites the business’s cash flow, typically measured by earnings, structures one facility sized to the transaction, and closes it under a single credit agreement with one set of covenants.

Define the need. Growth project, acquisition, recapitalization or refinance.
Share financials. Bank statements for smaller term loans; full financial statements and projections for unitranche.
Structure. Amount, term, amortization and covenants are matched to your cash flow.
Close and fund. One closing, one agreement, one lender relationship.

Who qualifies?

Short answer: Term loans and unitranche funding require a minimum 650 credit score. Term loans fit established small businesses with consistent revenue and some operating history. Unitranche is built for larger, profitable businesses, typically lower middle-market and middle-market companies, with predictable cash flow, solid financial reporting and a clear use of funds such as an acquisition or recapitalization.

Term loans: time in business, monthly revenue, personal and business credit (650 minimum credit score)
Unitranche: a 650 minimum credit score, consistent earnings, financial statements, management team, industry position and a defined transaction

What can you use them for?

Short answer: Term loans fund expansions, second locations, renovations, hiring, large inventory orders and debt consolidation. Unitranche facilities fund acquisitions, buying out partners or shareholders, recapitalizations, refinancing multiple loans into one, and major growth initiatives that need more capital than a typical small business loan.

Goal	Typical fit
Open a second location	Term loan
Consolidate several higher-cost loans	Term loan or unitranche, depending on size
Acquire a competitor	Unitranche (larger deals) or SBA 7(a) (smaller deals)
Buy out a partner	Unitranche or term loan
Recapitalize the business	Unitranche

How fast can you get funded?

Short answer: Many NexGen term programs approve in 1 to 24 hours and fund shortly after. Unitranche facilities involve deeper underwriting and legal documentation, so they take longer, though typically less time than arranging separate senior and subordinated loans, because there is only one lender group and one agreement to negotiate.

Unitranche vs. traditional senior + mezzanine debt

Short answer: Unitranche is simpler and usually faster to close because it has one lender group, one agreement and one rate. Traditional senior plus mezzanine financing can produce a lower cost on the senior portion, but requires two sets of negotiations, an intercreditor agreement and more parties at the table.

	Unitranche	Senior + mezzanine	Bank term loan
Lenders	One lender or group	Two or more	One bank
Agreements	One	Multiple, plus intercreditor	One
Rate	One blended rate	Lower senior, higher mezzanine	Often lowest
Speed and certainty	Typically faster	Slower, more parties	Varies; stricter criteria
Best for	Acquisitions and recaps	Very large, complex deals	Strong balance sheets

Pros of unitranche: simpler structure, faster close, one relationship to manage. Cons: the blended rate is typically higher than pure senior debt, and covenants apply to the whole facility.

How to apply with NexGen

Apply online in minutes. Tell us about your business and what the capital is for.
An advisor reviews your file. We determine whether a term loan or unitranche structure fits.
Compare offers. See options from 150+ private lenders and partners, including OnDeck, Mulligan Funding, Wayflyer and Rapid Finance.
Close and fund. We coordinate with the lender through closing.

Frequently asked questions about term loans and unitranche debt

Is my business big enough for unitranche?

Unitranche is usually used by profitable, established companies for larger transactions. If your need is smaller, a term loan or SBA loan is often a better fit, and an advisor will tell you which.

What is a blended rate?

It is a single interest rate that sits between what senior debt and subordinated debt would cost separately, applied to the whole facility.

Can I use a term loan to pay off other debt?

Yes. Consolidating several higher-cost obligations into one term loan can simplify payments and improve cash flow. See refinancing a merchant cash advance.

Do term loans require collateral?

Some do and some don’t. Many programs rely on revenue and a general business lien; larger loans may require specific collateral or a personal guarantee.

How is a term loan different from a line of credit?

A term loan pays a lump sum once; a line of credit lets you draw and repay repeatedly. Term loans fit one-time projects; lines fit ongoing needs.

What if my credit isn’t perfect?

Term loans and unitranche funding require a minimum 650 credit score. If your score is below 650, revenue-based financing may be a better fit, and NexGen’s business credit guidance can help you build toward these programs.

Planning an expansion, acquisition or refinance? Apply now or call (908) 639-4361. Our office is at 2 Hudson Place, Hoboken, NJ, and we fund businesses nationwide.

Rates, terms and eligibility vary by lender and are subject to underwriting. NexGen Lending (SRJ Marketing INC dba NexGen Lending) arranges financing through a network of lending partners. This page is for general information and is not financial, legal or tax advice.

Term loans & unitranche debt