Long-Term Business Loans
You own a business. Like any other entrepreneur, you plan to grow, open a few branches, start a new product line, acquire new real estate property, plant, or vehicle. All these are long-term plans that require heavy financing.
That’s where long-term business loans come in. This is a source of financing involving huge loan amounts, longer repayment terms, and slightly different rates from the industry’s cheapest.
Because long-term business loans involve lots of cash, they tend to have a stricter application process. Like with any other loan product, you need to shop around for the best lenders. That’s we carefully selected the best in the market. Take a look;
- Interest rates
- Term
- Amount
Wells Fargo
- Varies
- Five years
- Up to 500,000
Funding Circle
- 4.99% to 22.99%
- Six months to five years
- Up to $500,000
Fundation
- 8% to 30% APR
- Six months to five years
- Up to $500,000
- APR range
- Fees
- Terms
- Amounth
- Unemployment protection
Bank 1
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Bank 2
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Bank 3
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Table of Contents
How to get long term business loans
Long-term business loans work like any term loan. A lender issues you with a loan with a fixed repayment term and interest rate. Unlike short-term business loans that have their repayment terms running between 3 and 12 months, long-term business loans tend to be longer.
You’ll have up to 25 years to repay your loan. This gives borrowers an easier time to service their loans. Plus, the longer the term, the lower the monthly repayments making it an affordable loan product.
However, on the flip side, this is not a cheap option. The longer the repayment period, the more you’ll pay on interests.
Still, long-term business loans will do an excellent job supporting business growth. They’ll help you finance long-term investments. Such include acquiring a real estate property, funding a plant, or opening new branches.
You can borrow up to $5 million, or more with long-term business loans depending on the lender in question, your relationship with them, and your credit profile.
Long-term business loans typically carry lower interest rates. You’ll pay between 4% and 30%. Banks have the lowest interest rates followed by credit unions, depending on the nature of your relationship with them, then online lenders charge the highest rates.
Unlike their short-term counterparts, you’ll need collateral to qualify for long-term business loans. This can be a car, land, boat, or any valuable asset. This secures your loan, reducing the lender risk, hence earning you lower rates and flexible terms.
But, you risk losing your asset to repossession should you go against the lender agreement.
Business loans are best used for unanticipated events such as machine breakdowns, or carefully planned moves such as business expansion. Anything out of these two could have you misusing the loan. Long-term business loans are no exception.
Again, with long-term business loans, the business doesn’t have to take care of large expenses with funds right from its pocket. This way, the business isn’t brought to his knees.
Having a collateral will likely win you flexible repayment terms, higher loan limits, and lower interest rates.
Requirements to qualify
Different lenders have different set requirements a borrower must meet to qualify for long-term business loans.
The most basic one that cuts across all lenders is that a suitable borrower must be legally residing in the United States. The business must also be operating anywhere within the US jurisdiction.
Most lenders will also require that the business be operational for at least 6 months before applying for the loan.
The law also requires that the business owner be aged 18 years and above to make the agreement legally binding.
Since the loans often involve larger amounts, you’ll mostly need collateral. This has to be a valuable asset worth the same as, or more than the loan you’re applying for. Having such makes the application and subsequent approval easier.
Long-term business loans tend to have a stricter approval process. The lender will likely lay more emphasis on your credit profile.
You’ll need a credit score above 650 and a good loan repayment history to have an easy time with the lender. Having these will also negotiate lower interests and repayments on your behalf.
There must also be a genuine reason for applying for the loan. You’ll need verifiable proof like a proforma invoice.
Further, the applicant must also be owning part of the business, usually 20% with most lenders.
Most lenders also have annual revenue requirements. Your business must be generating at least $100,000 annually to be considered by most lenders.
Other basic requirements lenders require are the name of the applicant, age, residence, and social security number. For the business, you’ll need the name, location, products, and services offered. You’ll also need to provide the certificate of registration and tax reposts.
Best Types of long term business loans
SBA Loans
These are Government-backed loans that are mostly known for small businesses. They carry the lowest interest rates and have among the longest repayment terms in the market. SBA loans are issued by Small Business Administration lenders in the US, mostly banks.
With these, you can borrow up to $5 million. You’ll have between 10 and 25 years to repay your SBA working loan and equipment loan respectively.
SBA loans best serve borrowers looking to expand their businesses, consolidating an existing debt or financing a real estate project, including renovation.
To qualify for this financing, you’ll need at least 2 years’ proof of strong annual revenue. You’ll also need a credit score of above 600, and in most cases, a valuable asset to act as collateral.
Bank loans
Brick and mortar banks are among the longest-serving financers and sources of long-term business loans. their loans have an average repayment period of between 5 and 7 years.
Banks are generally known to charge lower interest rates. However, what you’ll pay largely depends on your credit profile.
Bank loans are best for those looking to expand their businesses. They’ll also come in handy when you’re looking to purchase equipment for your business.
Banks are also known to have lengthy application and approval processes. They demand stronger credit profiles with higher credit scores, mostly above 600.
The closest allies to banks are credit unions. They are known to offer loans with competitive interest rates and top-notch customer service. They also tend to have flexible loan terms and consider even borrowers with poor credit scores.
Alternative business loans
For borrowers who don’t qualify for business and SBA loans, tapping into these alternatives will still get you the financing you need.
Such include funding cycle and currency. Both are online lenders ensuring faster and reliable funding for businesses. They have repayment terms of up to 5 years. However, their interest rates tend to be higher than those of banks and credit unions.
Alternate business loans are best known for the expansion and purchase of equipment. The lenders are less strict compared to traditional banks, with most of them neither having minimum revenue requirements nor a preset duration in business.
Alternative lenders, however, tend to have lower maximum loan limits. That makes them not the best option for large business loans.
Can I have a long-term in a small business loan?
Most lenders have policies restricting the period in which borrowers, especially small businesses have to repay their loans.
Most small business loans tend to carry shorter terms. However, depending on your credit profile, and the lender in question, you can get longer terms on your small business loans.
A credit score of above 650 can give you an edge in such negotiations. You also are likely awarded lower interest rates and more flexible repayment terms.
A stronger business annual revenue of about $100,000 can also give you an upper hand when negotiating longer terms.
In a nutshell, most business loans are known to have shorter terms. This can be improved depending on your credit profile, loan repayment history, and your relationship with the lender.
You can negotiate longer loan terms if you have a good relationship with the lender.
How long is the term on business loans?
Different business loans come with different loan terms depending on the lender in question, and the exact loan product you wish to apply for. Each lender has clearly laid out policies concerning loan terms.
The amount you wish to apply for will also determine how long your repayment term will be. Larger business loan amounts tend to come with longer repayment terms. Smaller loan amounts mostly come with shorter repayment terms.
For small-term business loans, you’ll have between 3 months and 12 months to repay your loan. Long-term business loans, on the other hand, carry repayment terms of up to 20 years.
Bottom Line
A long-term business loan is an excellent source of financing for your business, and a smart way to meet your business expenses. With such, you’ll fund those business long-term projects without feeling a pinch.
Plus, these loans have longer repayment periods of up to 20 years so you have enough time to repay your loan. And, a longer repayment term means lower monthly repayment amounts.
These loans are also known to attract lower interest rates of below 5% making them affordable, especially if you get them through a bank.
On the table above are some of the best lenders in the market with the lowest interest rates, higher loan limits, and flexible repayment terms. Tap into any of them and give your business the boost it deserves.
Frequently Asked Questions (FAQ)
It’s a source of financing for a business that has a repayment term of between 3 and 10 years. However, this could extend up to 20 years or more depending on the specific loan product in question and the borrower’s qualification. The loans are meant to finance long-term business goals such as expansion, renovation, purchasing a real estate property or plant.
Long-term business loans are an excellent choice for business owners looking to undertake ventures that require larger amounts such as purchasing a real estate property. They tend to attract the lowest interest rates in the category of business loans. basically less than 5%. They also have longer repayment terms so you can comfortably repay your loans without having to strain your pocket or that of the business. Large business loans can also help you consolidate high-interest debts.
Most long-term business loan lenders are known to have a stricter and more rigorous approval process. This is mostly because the amounts involved are large hence risky to lenders. Plus, the fact that the loans are dependent on the long-term health of the business makes lenders even more skeptical. All this makes lenders more cautious when approving large business loans.
Having a good credit score is one of the most crucial requirements lenders check when approving large business loans. Most lenders have set their minimum credit score at 600. Banks tend to be stricter on this. Credit unions could be more lenient than traditional banks. Online lenders, on the other hand, are known to be the most lenient with lower credit requirements. However, they carry the highest interest rates.
Generally, long-term business loans are meant for healthy businesses that have been operational for at least 6 months, but preferably 2 years. They are also meant for businesses looking to expand, or acquire new real estate property or consolidate high-interest debts.
