Long-term commercial loan options for small businesses


Smart business owners know they can do more with a little extra working capital. And when they don’t have the extra money available, they take out small business loans.

Sounds simple, doesn’t it? There are actually many types of business loans out there, so finding the one that’s right for you requires doing your homework.

Let’s start this journey by understanding a little more about long term business loans.

What is a long term business loan?

Business loans have different repayment terms. Some must be repaid in a few months. But long-term commercial loans usually have longer repayment periods, sometimes up to 25 years.

The interest rates for these types of loans may be lower than for short term loans, depending on your qualifications and the lender’s approval criteria.

How Do Long Term Business Loans Work?

Once you are approved for a long term loan, you are presented with the loan amount and repayment terms. You will be told the period of time you have to repay the loan. Typically, you are able to pay off the loan sooner, but beware of prepayment penalties as some lenders charge them.

What types of business loans are long term?

Now let’s see what types of loans are considered long term.

Bank loans

Many banks and credit unions offer long-term business loans at low interest rates. To be eligible, your business must have been established for at least two years and have good personal credit scores.

Business line of credit

If you don’t want a large amount of money at the same time, a line of credit is a good option for long-term loans. You pay back what you borrow over the line and can continually borrow and repay over time.

Note that sometimes the line of credit needs to be paid off within a few months, but the line is open indefinitely, so we include it in the long term loan options.

SBA loans

The US Small Business Administration offers many long-term loan programs such as SBA 7 (a), microloans, and 504 loans. Some have repayment periods as long as 25 years.

Commercial real estate

If you need to buy real estate like an office building or commercial property, you should know that a loan won’t need to be repaid anytime soon. This makes getting a loan of, say, $ 1 million more feasible if you have decades to pay it off.

The best financing options for long-term business loans

Now that you have a better idea of ​​what type of loan might be right for you, let’s take a look at some of the commercial lenders that offer great loan options for the best long term business financing.

Intermediate term loan options

If you want a loan of more than a few months but less than 25 years, Kapitus has a five-year medium-term loan of up to $ 5 million. Credibility capital loans up to $ 500,000 with repayment periods of one to five years.

Line of credit options

On the bridge, Fund of funds, and cabbage offer lines of credit.

OnDeck offers lines of credit from $ 6,000 to $ 100,000, with one-year repayment terms.

Fundbox offers financing options up to $ 150,000 with 12 or 24 week repayment terms. You can borrow the funds again after they are repaid.

Kabbage has lines of credit between $ 1,000 and $ 150,000. Each draw must be repaid in six, 12 or 18 months and can be re-borrowed.

Long term loan options

You have a few options in this category including On the bridge and Newtek. With OnDeck, you can borrow from $ 5,000 to $ 250,000 and pay it back over two years. Newtek offers long-term loans of $ 1,000 to $ 15 million, with terms of seven to 25 years.

SBA loan options

Smartbiz is a great option for SBA 7 (a) loans. You can borrow anywhere from $ 500,000 to $ 5 million with a 25 year repayment period.

Long-term or short-term business loans

So, in the long run, is a long term loan better for you?

Here’s something important to note: Longer-term loans may have lower interest rates, but you can still pay more interest overall, since you’re paying them over years, not over years. months.

If you’ve borrowed $ 1 million at 3%, with a 25-year repayment, you’ll pay that 3% over the life of the loan. If you borrow $ 10,000 and pay it back within two years at an interest rate of 10%, while the interest rate is higher, you may end up paying less interest overall because it is a much shorter term.

The truth is, if you have bad credit, you cannot qualify for long term bank loans or SBA loans. Your only option may be to take out shorter term loans from other lenders at higher interest rates. Keep in mind that some online lenders charge a set-up fee as well, which can increase your expenses.

Sometimes a shorter period is better, such as when purchasing equipment. Since equipment has a finite lifespan, equipment financing tends to have payback periods of a few years.

If you don’t qualify for a longer repayment period, perhaps because you’re running a new startup and haven’t built your credit yet, consider loans that have a minimum credit score requirement or that take into account other factors, such as your annual income. . You may also be eligible for business credit cards.

Otherwise, you can take the time to build up your credit in order to qualify for long-term business loans with low interest rates.

What is the longest term for a business loan?

Borrowers need to know how long they will have to make their monthly payments before contract a loan. Each type of loan can have different terms. In the short term, you might only have a year to pay off a loan.

In contrast, some loans can be repaid over 25 years. These are usually larger loans, such as real estate or SBA loans.

How To Qualify For Long Term Business Loans

Before you begin the application process, find out about the requirements of a lender to approve you for a loan. Is there a business or personal credit score requirement? Do you need a certain amount of annual income? How long have you been in business?

Established businesses that have a proven track record of financial stability may find it easier to secure lower interest rates, so examine your qualifications to understand what type of rate you might qualify for.

Before applying, see what documents you will need to provide. Bank and SBA loans may require more financial information, such as tax returns, financial statements, and bank statements. They can also review your credit history, so take a look for yourself before you apply to see what you’re working with.

How to choose the right long-term business loan

The type of financing your business needs is unique and like no other. If you are looking for long term financing, explore options with traditional banks, credit unions, and online lenders.

Before you apply, have a plan on how you will use the loan proceeds. Are you looking to grow your business or just maintain a stable cash flow? Can you afford to make repayments every month? How will the money help you grow your business?

Small business owners need to keep an eye on the future of their business, and long-term business loans are a great tool to help them.

This article was originally written on January 7, 2022.

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