Best Long Term Business Loans

What is a long-term commercial business loan?

In this context, repayment over anything more than a year can be regarded as long-term, though a long-term loan is usually more than 5 years. The main benefits of such a business loan are low interest and affordable monthly payments because of the time scale.

For those reasons long-term business loans are popular but often carry hard to meet qualification targets.

Best long term business loan options

SBA (7a loan): best for long term business loan needs (up to 25 years)

SBA 7(a) loan

✔ Funding: Borrow up to $5,000,000
✔ Minimum Credit Score: 650
✔ Best For: SBA loans
✔ Funding turnaround: Varies.

The SBA 7(a) program features lenders such as Wells Fargo in their network and provides capped interest rates and long repayment term flexibility. Term loans and lines of credit access available. Typically, collateral will be required with a personal guarantee. Funding times vary and may be longer than most other lenders.

COMPARE LOANS

Funding Circle: best for long term needs up to 5 years

Funding Circle

✔ Funding: Borrow $25,000 to $200,000
✔ Minimum Credit Score: 700
✔ Loan term: 6-12 months
✔ Funding turnaround: 24-48 hours

Funding Circle offers affordable business loans with interest rates lower than alternative lenders with monthly repayment schedules for borrowers with good to excellent credit scores.

COMPARE LOANS

Credibility Capital: best for long term needs up to 5 years

Credibility Capital

✔ Funding: Borrow up to $500,000
✔ Minimum Credit Score: 650
✔ Best For: Term loans
✔ Funding turnaround: Varies.

With Credibility Capital, borrowers with strong credit can obtain small business loans with attractive rates. A personal guarantee along with a business lien and revenue may be required to qualify. Note: This lender provides funding for all states except for North Dakota, Nevada, South Dakota, Vermont.

COMPARE LOANS

How does a long-term business loan work?

A long-term business loan operates like any other business term loan. The lender agrees to supply a business with a fixed amount of money which is repaid, plus interest, over the term of the loan in regular (usually monthly) installments.

What period is regarded as long-term depends on the loan provider, but anything less than a year would normally be regarded as short-term. Some lenders would describe loans for 1-5 years as medium-term but they can be treated in the same way as long-term loans.

Depending on the amount and purpose of the loan, a long-term loan may be repaid over anything from 12 months to 25 years.

Because the terms are so generous and the interest so low, long-term loans are ideal for spreading the costs of major investments like real estate, capital equipment, and growth.

That being said, lenders offering long-term loans usually require high credit ratings, excellent trading records, and longevity from their applicants. Such loans also generally demand some form of collateral such as real estate or other assets plus personal guarantees. However, some alternative lenders may have more relaxed standards.

What are the different types of long-term business loans?

• Online business loans: Online loan providers are a good option for long-term loans in the $5,000 - $500,000 category. Though qualification for an online business loan may be a little easier than for a traditional lender, an excellent credit score and a trading history of a minimum of 2 years are fairly standard. Though not easy to qualify for, most online providers have a straightforward application process along with fast approval and quick access to the funds.

• SBA loans: The Small Business Administration does not itself provide loans but has several loan programs it runs in conjunction with approved financial institutions. These loans, particularly the 7(a) and 504 loans, are highly sought after because of their long terms and low-interest rates – typically 6-10%. However, they are difficult to get. A credit score of above 640, strong financial records, plus at least two years of trading are mandatory. And if you do get approved, the whole application and funding process can take more than two months.
• Bank loans: Traditional banks are used to offering long-term loans to businesses but like SBA loans they are difficult to qualify for and relatively slow to fund. However, if applying to the bank that handles your day-to-day financials, then there should be a business relationship that helps with the process.

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

PROS

• Flexibility - Once you have the money you can spend it how you like, on machinery, real estate, whatever you need. The loan is not given for something very specific.
• Reasonable interest rates - Long-term loans typically carry low-interest rates and good terms making them affordable.
• Fast funding - Though some banks and SBA loans may take a while many long-term loans are fast to process and fund.
• No sharing of profits - A lender is not an investor in the true sense and doesn't expect a share of the extra profits a loan should produce.

CONS

• Difficult qualification - Getting a low-interest, long-term loan requires a great deal of the borrower in terms of fiscal probity.
• Lenders may not be willing to loan you as much as you want - though loan providers may approve your application they may not think you need as much as you are asking for.
• Meeting the payments may become difficult - large loans, even at low-interest rates, require relatively large repayments that may become a burden if you suffer a downturn in trading.

Long-term business loan vs. Short-term business loan: What’s the difference?

The benefits of a short-term loan are that they are often is easier to qualify for than a long-term loan. Short-term loan providers generally require lower credit scores and a shorter trading history than long-term providers. This comes at the cost of higher interest rates and a repayment period of months rather than years.

While other forms of borrowing may be appropriate for inventory purchase or equipment leasing, for instance, long-term loans win out for major investment.

How much does a long-term business loan cost?

The APR for long-term loans is usually 4-12%, though can be higher.