What type of debt is a term loan generally considered to be?

A term loan is generally considered to be long-term debt because it typically involves borrowing a specific amount of money to be repaid over a set period, usually more than one year, with regular payments of interest and principal. This form of financing is often used for significant investments, such as purchasing equipment or real estate, requiring a longer timeline for repayment.

Term loans have fixed terms that range from a few years to several decades, which distinguishes them from short-term debt that is usually expected to be repaid within a year. Convertible debt, on the other hand, can be converted into equity under certain conditions, and an equity equivalent refers to financial instruments that behave similarly to equity securities but are classified differently on the balance sheet. Thus, categorizing a term loan as long-term debt accurately reflects its structure and repayment timeline, aligning with the nature of financing it provides to the borrower.