The term “short term business loan” refers to a lump sum of money provided to a business that then uses the capital for a business opportunity purpose. Such purposes may include working capital, equipment purchases, business expansion or renovation, and an abundance of other business needs.

Long-term business loans are generally defined as a specified loan amount with a repayment schedule that exceeds 2 years in duration up to 25 years, has either a fixed or adjustable principal and interest rate, and a monthly or bi-monthly payment deducted from a business bank account. A long-term loan is often for well-established and healthy businesses with sound financial statements.

Long-term business loan products are offered by banks, alternative lenders and brokers. Additionally, the Small Business Administration offers SBA business loan products that are sold and serviced by approved lenders.

Long-Term Business Loan Uses

  • Working capital
  • Business expansion
  • Improvement or remodel of existing facilities
  • Business acquisition
  • Purchase of commercial vehicle or vehicles
  • Equipment
  • Inventory or supplies
  • Hire new employees
  • Refinance existing debt

Types of Long-Term Business Loans: Long-Term Small Business
Lending Options

 

Long-Term Business Loans

Product Overview:

Loan Size: $30,000 to $250,000

Processing Times: Prequalify in 5 minutes, funding as fast as 2 days after application completion

Interest Rates: Fixed Rates from 6.99% to 26.99%

Loan Duration (Term): 2 to 5-year repayment terms

Prepayment Penalty: None

Payment: Monthly payments are debited from checking account

Fees: Origination fee 3% and up with $200 to $300 for closing costs

Security: Lien on business assets, no minimum requirement for the value of assets

 

Qualifications:

Personal Credit

  • Minimum 650 FICO, with good to excellent credit history

Public Records

  • No bankruptcies or foreclosures in the past 3 years
  • No outstanding tax liens

Cash Flow

  • Business bank statements show cash flow to support loan payments

Basic Eligibility

  • 2+ years in business
  • Owner must be U.S. Citizen(s) or lawful permanent resident
  • Acceptable industry

Use of Proceeds

  • Working capital
  • Refinance existing business debts
  • Equipment purchase

 

Document Requirements:

  • 1-page simple application 
  • 2 years business tax returns
  • Year to date profit and loss and balance sheets
  • Accounts receivable/accounts payable reports
  • 6 months of business bank statements

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SBA Working Capital | SBA 7(a) Loan

Product Overview:

Loan Size: $30,000 to $350,000

Loan Description: SBA 7(a) loan

Interest Rates: Prime rate plus 2.75% to 3.75%

Use of Proceeds: Working capital, debt refinance, new equipment purchases

Processing Times: Pre-qualify in 5 minutes, funding as fast as 7 days afterapplication completion

Loan Duration (term): 10-year term

Pre-Payment Penalty: None

Payment: Monthly payments

Fees: 4% referral and packaging fee

Security: Blanket lien on business assets, personal guarantee by all 20% owners

 

Qualifications:

Personal Credit

  • Minimum 650 FICO, with good to excellent credit history

Public Records

  • No bankruptcies or foreclosures in the past 3 years
  • No outstanding tax liens
  • No outstanding collections
  • No recent 30+ day late payments

Cash Flow

  • Sufficient business and personal cash
  • Business bank statements show cash flow to support loan payments

SBA Specific Criteria

  • No felonies
  • No delinquencies and/or default on government loans

Basic Eligibility

  • 2+ years in business
  • Owner must be U.S. Citizen(s) or lawful permanent resident
  • Acceptable industry

Use of Proceeds

  • Working capital
  • Refinance existing business debts
  • Equipment purchase

 

Document Requirements:

  • 1-page simple application 
  • 2 years of business tax returns
  • Year to date profit and loss and balance sheets
  • Accounts receivable/accounts payable reports
  • 6 months of business bank statements

Frequently Asked Questions

Why is long-term financing difficult to obtain?

It is difficult to obtain a long-term business loan because the lender is typically offering attractive interested rates over a longer duration of repayment. This puts the lender’s money at risk to collect for long periods of time than a business line of credit or shorter-term business loans. It comes down to risk. To minimize the risk of long-term business financing, business lenders will look for higher credit rating standards and require a lot of financial statements to review business health. 

Short-term vs long-term business loans

Short-term business loans cost more and are shorter in term than long-term business loans. They are easier to qualify for than long-term business loans due to the higher cost and shorter-term though so it probably is a great alternative when you can’t get approved for a long-term business loan.  

What are the pros and cons of long-term business loans?

Pros 

  • Lower Interest Rates
  • Lower Origination costs
  • Longer terms in years which provides for lower payments
  • Monthly payments
  • Access to more Capital than short term loans

Cons 

  • Qualifications are more difficult to get approved than short term business loans
  • Lengthy Paperwork required 
  • Longer Processing times
  • Not flexible when it comes to drawing capital

How many years can you finance a long-term business loan?

Depending on the business loan product and your qualifications, it is possible to get up to 25 years in terms with the SBA CRE program, but more often than not, terms are from 2 years to 10 years in duration.

What is a good interest rate on a long-term business loan?

An important distinction between short term business products and long-term business loans is that you are charged an interest rate which is principal and interest, unlike short term business loans which are based on factor costs. Typical long-term rates start at prime or treasury index plus 2.00% an up. Typical interest rates as of 2020 are 6.50% up to 28.99%. That is a big range and is dependent on business loan products and your qualifications. 

What are the benefits of long-term business loans?

Long-term business loans are beneficial to business owners because the longer length in term provides for lower payments than shorter-term loans. They also tend to have lower interest rates and origination costs. With the extended terms of a long-term business loan, that also means that larger amounts can be lent to the small business as well for those large product or project purchases such as business expansion. 

What are the drawbacks of long-term business loans?

With a long-term comes a long-term commitment as well. Long-term business loans do not operate like a business line of credit that you can draw cash at any time for any short term cash flow or working capital needs. The flexibility is not available with a long-term business loan and the only way to get more money after consummation is by either refinance or applying for a business line of credit or alternative business lending product. 

Who qualifies for long-term business loans?

As a general rule, healthy businesses, more than 2 years old in operation, are the ones who qualify for long-term business loans. If your business is struggling with low daily balances in your business bank account or your credit is not good or excellent than getting a long-term business loan will be a challenge. You have to have your financial house in order with timely filed tax returns, up to date financial statements such as profit and loss statements, balance sheet, accounts receivable and accounts payable reports. The better the credit the better the rate and terms you will get for your long-term business loan as well. 

Can I qualify for a long-term business loan if I have bad credit?

The short answer is no. If you have bad credit than long-term business loans are not for you. Credit scores typically have to be above at least 650 and you must have a long history of handling large debts like mortgages or auto loans as well as the ability to manage multiple credit cards. Remember it’s not just about the FICO score but also the multiple trade lines of credit you manage over a longer than 3 year time period.

Can I get a long-term business loan if I am a start-up business?

The Small Business Administration (SBA) offers an SBA Micro-loan for start-up businesses but be forewarned as the process can be intense. Many documents will be required and the process as a whole will take weeks to learn your fate.  The Small Business Administration’s micro-loan program offers small businesses anywhere from $500 to $50,000 in capital. The average SBA micro-loan is $13,000.

SBA Micro-Loan

Maximum Loan Amount: $50,000

Loan term: Up to 6 years in term

Interest Rates: 6.99% to 13.99% (based on US Treasury index + interest) 

Loan repayment terms vary according to several factors such as loan amount, planned use of funds, requirements determined by the intermediary lender, and the needs of the small business borrower

What term lengths can I get with a long-term loan?

Long-term business loans range from 2 to 25 years, but most common are 2 to 5 years in length. The term varies based on the long-term business loan product you are approved for.

What are the interest rates for a long-term loan?

Long-term business loan rates vary depending on your qualifications and the long-term business loan product you were approved for and can range from as little as 6.99% up to 28.99% principal and interest. Always compare and contrast offers from multiple lenders when making any decisions on rate, term, and fees. 

How much will long-term business loans cost?

Outside of interest rates, most long-term business loans will have origination, application, underwriting or some type of processing fees. Standard fees can be as little as 1% of the loan amount and up to 5% in fees. Always ask for disclosures outlining all fees associated with your long-term business loan offer.

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Summary

Long-term business loans are the best financing that is available to small businesses. Unfortunately, they are not easy to obtain and have high credit standards and a lengthy financial disclosure of the business. It’s worth the effort if you can get a long-term business loan and it’s important to work with a knowledgeable provider who can steer you through the prequalification and approval process. This provider should have the experience and knowledge so that you are offered all available long-term business loans that are available in the market place. You don’t want to end up wasting your time on a product you were not qualified to get from the beginning. Not a good feeling for sure. The risks of approval should be disclosed upfront.

How to Apply for Long-Term Business Loans?

Check out how to find the best small business loans to weigh all the benefits and evaluate the decision to get funding for your business. Start with this online form

Applying for a loan with AdvancePoint Capital is as simple as a 1, 2, 3, 4 process. Start with this online form, then fill out the short application page, wait a few hours for your approval, and then get your money!

AdvancePoint Capital offers an easy business loan experience. Our customers love the fast, streamlined process and high approval rates that come from working with us. All credit scores are considered.

The fast, convenient and straightforward way to get the money you need for your business – now! Get your Quote Today by filling out our simple form.

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* All loans made by either WebBank, an FDIC-insured Utah industrial bank, or Bank of the Internet Federal Bank, an FDIC-insured federally chartered thrift located in California. In connection with the loans, the Banks' underwriting conditions and terms apply.