Long-Term Business Loans

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The Best Long-Term Small Business Loan Uses

Long-term business loans are generally defined as a specified loan amount with a repayment schedule lasting a duration of 2 to 25 years, has either a fixed or adjustable principal and interest rate, and monthly or bi-monthly payments deducted from a business bank account. These loans are often for well-established and healthy businesses with sound financial statements and spending histories with the highest probability to pay back a long-term loan.

A long-term business loan provides a lump sum of money upfront to a business that then uses the capital for an opportunity or purpose. The best purposes may include working capital, equipment purchases, expansion or renovation of existing real estate, and an abundance of other business needs. Loan amounts tend to be larger for that reason and long-term pay back terms are needed to make payments affordable and allow business owners to get a return on investment. Business owners rely on funding options to fuel these business needs for growth and success.

Banks, online lenders, alternative lenders, marketplace financing companies, and brokers offer options for long-term business loans. Additionally, the Small Business Administration (SBA) offers small business loans that are sold and serviced by approved lenders. Due to their long pay back period, the qualifications are fairly strict. Solid credit histories, time in business, and other factors will play an integral role when trying to qualify for a long-term loan.

  • 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

The Best Types of Long-Term Business Loans

Traditional Long-Term Business Loans

You can find these loans from both traditional avenues such as banks and online alternative lenders like AdvancePoint Capital. This is great news for business owners who now have more opportunities and choices to deliberate when it comes to finding the right financing solution they need. These long term business loans have the longest repayment period of any loan of up to 25 years, however, they also require substantial credit histories and time in business lengths.

Traditional Long-Term Business Loan Product Overview (Rates and Terms)

Loan Amounts: $30,000 to $250,000
Loan Description: Long-Term Business Loan
Interest Rates: Fixed rates from 6.99% to 26.99%
Use of Proceeds: Working capital, debt refinance, new equipment purchases, etc.
Processing Time: Prequalify in 5 minutes and receive funding as fast as 2 days after application completion
Loan Duration: 2 to 5-year repayment terms
Prepayment Penalty: None
Payment: Payments debited from a 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

Traditional Long-Term Business Loan Qualifications

Personal Credit Score

  • Minimum 650 FICO; good to excellent credit score history

Public Records

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

Cash Flow

  • Business bank statements show cash flow to support loan payments

Annual Revenue

  • Annual revenues greater than $250,000 per year

Basic Eligibility

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

Use of Proceeds

  • Working capital
  • Refinance existing debts
  • Equipment purchase

Document Requirements

  • 1-page simple application
  • A business tax return for two years to show proof of annual revenues
  • Year to date profit and loss and balance sheets
  • Accounts receivable/accounts payable reports
  • 6 months of bank statements


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SBA Working Capital | SBA 7(a) Loan

The SBA offers long-term business loans that mitigate risk in order to empower small business owners and their growth. SBA loans are not easy to qualify for and require top-of-the-line borrower history and profitability to obtain. SBA loans have great interest rates because they are guaranteed by the SBA, which gives lenders security with their return on investment. However, SBA long term business loans require a solid credit history and business track record, meaning they’re not easy to qualify for if you’re struggling.

SBA Business Loan 7(a) Product Overview (Rates and Terms)

Credit Limit: $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, etc.
Processing Time: Prequalify in 5 minutes and receive funding as fast as 7 days after application completion
Loan Duration (Term): Up to 10 years
Prepayment Penalty: None
Payment: Debited from a checking account
Fees: 4% referral and packaging fee
Security: A blanket lien on assets; personal guarantee by all 20% owners

SBA Loan Qualifications

Personal Credit Score

  • No minimum personal credit score but good to excellent credit score history needed

Public Records

  • No bankruptcies or foreclosures in the past 3 years
  • No student loans that are in default and must be paid as agreed; student loans evaluated case-by-case
  • No outstanding tax return liens
  • No outstanding collections
  • No recent 30+ day late payments

Cash Flow

  • Business bank statements show cash flow to support loan payments

Annual Revenue

  • Annual revenue return greater than $250,000  per year

SBA Loans Specific Criteria

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

Basic Eligibility

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

Use of Proceeds

  • Working capital
  • Refinance existing debts including other loans and credit cards
  • Equipment purchase

Document Requirements

  • 1-page simple application
  • A business tax return of two years to show annual revenue
  • Year to date profit and loss and balance sheets
  • Accounts receivable/accounts payable reports
  • 6 months of bank statements
  • Merchant processing statements (for businesses that accept credit cards)

SBA Micro Small Business Term Loan Product Overview (Rates and Terms)

Maximum Loan Amount: $50,000
Repayment Terms: Up to 6 years in term
Interest Rates: 6.99% to 13.99% (based on US Treasury index + interest)

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


Identify Why You Need a Business Loan

The first step in any search is clearly defining why your small business needs the funds. The “why” will direct you many times to the right loan product. Working capital is the most popular reason because there are so many ways it can be used. When cash flow gets tight due to fluctuations in sales, extra capital can provide the buffer needed to carry the business through rough times.Other reasons for the need for business financing include, but not limited to:

The Pros and Cons of Long-Term Small Business Loans

Long-term business loans can be used for a wide range of needs, but there are some important factors to weigh before deciding if long-term financing is right for you. Let’s look at the pros and cons.

Pros of Long-Term Business Loans

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

Cons of Long-Term Business Loans

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

The Best Business Funding Providers Offering Long-Term Business Loans

U.S. Small Business Administration – The SBA’s mission is to help Americans who have the desire and passion to be entrepreneurs start, build, and grow their businesses successfully. The SBA is not the lender, but a government agency that provides small business loan program guarantees of up to 85% of the amount provided through an SBA-approved business lender. The approved business lenders may require real estate, in some cases, for collateral. Most loans offered by SBA are considered term business loan long. SBA is the leading source for a long-term business loan and provides the most long-term financing in the United States to small businesses.

Federal and State Banks – Bank loans are known to have long-term loans for businesses but be prepared to provide assets for collateral such as real estate. A bank loan for a business will require extensive paperwork and definitely some patience if they are to loan long-term. Bank loans at the end of the day do have the best terms, but if you’re looking for quick service, a bank loan may not be the best solution and another option may be best.

Online Lenders – Online lenders are convenient, offer quick service, and are the best alternative to banks and credit unions when trying to access long-term business loans. Online lenders have better service and more diverse financing options that offer more flexible terms when it comes to long-term loans.

Credit Unions – Credit unions are not known for providing business loans, but some do, so they can’t be left off the list. Expect it to be difficult, if they do to qualify for long-term business loans.

Loan Brokers – Some business loan brokers offer or specialize in funding businesses looking for a long-term loan. Brokers do so primarily through approved lenders with the SBA, but also some online lenders as well.

Fundera – Fundera is a business financing matchmaker (marketplace) who will match you up with long-term business lenders you may be qualified for. Fundera also offers a variety of loans, lines of credit, credit cards, and other business services with competitive terms from a network of lenders.

Funding Circle – Funding Circle is a P2P small business term loan lending platform considered in the category of alternative lenders that only offers medium-term installment business loans. Funding Circle has experienced some difficulty in the U.S. market and has struggled to reach profitability putting stress on approval criteria and making it more difficult to gain approval. Funding Circle interest return rates are more expensive and the repayment term is shorter than most SBA-backed loans.


A long-term loan is the best financing available to small businesses looking for large loan amounts with the lowest payments vs short-term loans. Unfortunately, they are not easy to obtain and have high credit score standards and a lengthy financial disclosure of the business. It’s worth the effort if you can get a long-term loan for real estate 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 options that are available in the marketplace. 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. Make sure that you have knocked out the basic requirements of a long-term loan so that you’re not spending all of your time and energy on a goal that’s unreachable. Make sure your credit is up to par and finances are in order.

What Is the Difference Between Short-Term Loans and Long-Term Loans?

The main difference between short-term loans and long-term loans is the time required to pay back the borrowed money.

A short-term loan is a personal loan or business loan issued by credit unions, banks, or online lenders. Similar to a business credit card, you’ll want to pay back any debt quickly. They are useful when you need to cover immediate expenses or expand your working capital.

These loans are deposited in the borrower’s bank account as a lump sum. They can be used to improve a company’s cash flow or make an asset purchase. 

A long-term loan is similar to short-term loans in that borrowers receive the full amount as a lump sum. Most banks, the Small Business Administration, and online lenders provide these loans. In addition to an SBA loan or business loan, you can get a long-term personal loan. 

Examples of long-term loan products include merchant cash advances, a reverse mortgage loan, car loans, and secured business loans. Here are other key differences between these loans.

1) Repayment Schedule

Short-term loans tend to have fewer loan payments overall. With this type of loan, lenders expect you to have paid back the entire loan within one to five years. Some loans have terms as short as six months.

Long-term lenders, on the other hand, will set a repayment timeline for years or even decades. For example, mortgages come with a loan repayment of 20 or 30 years. Personal loans are usually five to seven years.

Usually, you’ll make monthly repayments with either long-term or short-term loans, but the debt is stretched out over a much longer timeline with long-term financing. Because they involve a longer period of time, you could pay more in interest overall.

2) The Need for Collateral

One of the advantages of short-term lending is you don’t usually need any collateral. These loans aren’t as risky for lenders, so you generally won’t have to use a high-value asset to back the debt.

Because of the larger timeframe with long-term lending, problems with non-payment or late payments are more likely. There’s also more money involved because these loans tend to be large.

The bottom line is that there’s more risk. So the bank might ask you to put up an asset as security before they finance the amount you want to borrow.

3) Ease of Approval

Long-term and short-term lending products have different loan application requirements. With a shorter repayment schedule, banks require a borrower to provide minimal documentation. Also, they’ll approve your loan fairly quickly — sometimes within 24 hours.

This can be a huge advantage for small businesses that need fast access to funding.

With long-term financing, you need to fill out various forms and provide verification for more categories.

Suppose you take out a commercial loan or are interested in SBA loans. In that case, you’ll need specific information to demonstrate your company’s financial strength, such as a balance sheet or bank statements. But you’ll also need documentation on any asset you’re using as security. 

These loans also tend to take more time to be approved, from a few weeks to around three months.

4) Loan Amount

Short-term lenders let commercial borrowers take out between $5,000 to $300,000. There’s no fixed amount for long-term loans. Generally, for personal loans, you can borrow up to $50,000. For business loans or mortgages, you can borrow hundreds of thousands or more. 

For both short-term and long-term lending, the maximum amount depends on the loan type and how qualified the borrower is.

5) Interest Rates

One of the other main differences between a short-term loan and longer-term financing products is the interest charged. Basically, a lender charges more with a shorter repayment schedule.

The lender won’t make enough with a low-interest rate and a shorter term, so they charge the borrower high interest rates. However, the cost of interest will vary based on the type of loan you take out. For example, payday loans are known to have extremely high rates. 

Financial institutions charge lower interest rates for long-term loans because they are paid over several years. And because they’re backed up by collateral, they’re less risky.

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Frequently Asked Questions

It is difficult to obtain this long-term financing option because lenders typically offer attractive interest rates over a longer duration of repayment. This money from lenders at risk to collect for extended periods of time than a line of credit or short-term financing loans. It comes down to risk. To minimize the risk of a business loan long-term, business underwriters will look for higher credit rating standards and require a lot of financial statements to review business health.

Short-term loans cost more and have shorter terms compared to their counterpart. Unlike longer options that may have return terms ranging from 2-25 years, they are easier to qualify for than long-term financing loans due to the higher return cost and shorter-term, so it probably is a great alternative when you can’t get approved for a longer solution. Credit requirements may vary depending on the solution you’re looking for, however, the credit requirements will often be much less than the long-term alternative.

They range from 2 years to 25 years. However, the most common long-term loans are 2 years to 5 years in length. The term business loans will vary based on the product you are approved for. However, typical SBA loans are up to 2-5 years. Depending on the loan product and your qualifications, it is possible to get up to 25 years in return terms of the SBA CRE program, but more often than not, terms are from 2 years to 10 years in duration.

An important distinction between short and long-term loans is that you are charged an interest rate which is principal and interest, unlike short-term loans which are based on factor costs. Typical return rates start at prime or treasury index plus 2.00% and 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. Always compare and contrast offers from multiple lenders when making any decisions on rate, term, and fees.

These are beneficial to businesses because a longer-term length provides for lower return payments compared to shorter-term loans. They also tend to have lower interest rates and origination costs. With the extended terms, that also means that larger amounts can be lent to small businesses for those large purchases or overall long-term expansion plans. While these are great benefits, they do require solid credit histories and other fairly hefty requirements to obtain.

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 return balances in your bank account or your credit score is not good or excellent then getting long-term financing will be a challenge. You have to have your financial house in order with a tax return filed on time each year, up to date financial statements such as profit and loss statements, balance sheet, accounts receivable, and accounts payable reports. The better the credit score the better the rate and terms you will get for your long-term business loan as well. In some cases, real estate may be needed for collateral for a long-term small business loan.

The short answer is no. If you have a bad credit score, then long-term business loans are not for you. Your credit score typically has 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.

The SBA offers loans through micro-loan programs for start-up businesses but this process can be intense. Many documents will be required and the process as a whole will take weeks to learn your fate. The SBA’s microloan program offers small businesses anywhere from $500 to $50,000 in the capital. The average SBA micro-loan is $13,000. Credit will still play a role, so that’s important to remember.

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 funding amount and up to 5% in fees. Always ask for disclosures outlining all fees associated with your long-term business funding offer.

A marketplace funding provider offers a wide array of products to businesses from online lenders such as long-term financing loans, short-term business loans, business and merchant cash advance, SBA, credit cards, equipment financing, invoice financing, purchase order financing, auto loans, as well as other real estate based loans. Companies such as AdvancePoint Capital, Fundera, and Funding Circle are considered marketplace funding providers.

Generally speaking, both companies offer a wide selection of business financing with a large network of lenders, but what makes AdvancePoint Capital different is they will provide products not only for excellent credit-healthy companies but also the credit impaired.

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