Best Long-Term Business Loans

The SBA offers several long-term loan programs. The most popular is the 7(a) program, which offers up to $5 million for almost any purpose with a maximum repayment term of 10 years.

Falling under the 7(a) umbrella is the Community Advantage Loan which offers the same competitive rates and terms for businesses in underserved communities.

The SBA Microloans program is another option for smaller financing needs. These loans provide up to $50,000 that can be repaid over a maximum term of six years.

For businesses that want to improve their facilities or purchase real estate, 504 loans provide 40% of funding toward these projects. A maximum of $5 million can be distributed through this program, with repayment terms set at a maximum of 25 years.

SBA loans can be obtained from intermediary lenders, including SBA-approved banks, credit unions, nonprofits. and alternative lenders.

Banks are a very popular source for obtaining long-term business loans because of low interest rates and favorable terms. However, qualifying for these loans can be difficult. Credit scores must be very high, the application and approval process can be lengthy, and banks often have strict requirements in terms of time in business and annual revenues. Businesses that do qualify, however, will find bank loans are easily one of the most affordable loans on the market.

Credit unions also offer very competitive rates and terms, and many businesses prefer to work with these lenders because of the more personalized service they receive. Credit unions may have a bit of flexibility in terms of their requirements, but all borrowers should come to the table with a high credit score and a stable business history.

Alternative lenders offer some benefits that banks, credit unions, and most SBA intermediaries do not, including fast funding and lower credit score requirements. However, there are also several drawbacks to working with alternative lenders (also sometimes referred to as “online lenders”). Higher interest rates are one of the biggest drawbacks. Lower maximum loan amounts are another.

Most alternative lenders set their maximum repayment terms at five years. Depending on the amount borrowed, this could mean higher monthly payments, especially with higher interest rates.

However, the return on investment may be enough for a business to move forward with one of these loans. These loans are best for businesses that don’t meet other lenders’ qualifications, including but not limited to credit score, time in business, or annual revenue.

• Smaller Monthly Payments: Large expenses can be broken down into affordable monthly payments by taking out a long-term business loan.
• Higher Borrowing Amounts (Usually): Long-term business loans often have higher maximum borrowing amounts of up to $1 million to $5 million. However, alternative lenders that offer long-term loans may not offer loans this large.
• Lower Interest Rates: Borrowers with the highest credit scores can take advantage of interest rates as low as 5% (or sometimes lower), making this one of the most affordable loan options. The longer your term is, though, the more you will pay for the loan in total.
• Collateral Requirements: For most long-term loans, business collateral is required. In some cases, the collateral will be the item being purchased with the loan proceeds, such as equipment, a vehicle, or real estate.
• Higher Credit Score Requirements: A long-term loan can be one of the most difficult loans to obtain. A great credit score (with no negative items on your credit history) is required to get the most affordable funding. While some lenders may work with borrowers with lower scores, interest may be much higher and terms not as favorable.
• More Documentation Requirements: Because long-term loans are often for very large amounts of money, lenders want to ensure that all borrowers can pay back the loan. This means that there is a lot of paperwork involved in the application process. Borrowers must come prepared to take the time needed to provide the lender with all documentation to qualify for the loan.
• Longer Approval Process: Depending on the lender, getting approval for a long-term business loan could take weeks or even months — not ideal for a business that needs immediate funding.
• Better For Long-Term Investments: Because you will be paying the loan off for a number of years, long-term loans are more suitable for long-term business investments. For example, you don’t want a 3-year loan to pay off 3 months of inventory.

• Much Shorter Term Length: While long-term loans have years-long terms, STL terms are measured in months or weeks. Any loan with a term length of one year or shorter is considered an STL, but many STLs have a term length of just 3 months.
• Larger, More Frequent Loan Payments: Short-term loans usually require weekly or even daily repayments. And when the term is short, the repayments are large and can be difficult for some businesses to afford.
• Lower Borrowing Amounts (Usually): Short-term loan borrowing amounts often cap out at $250,000 or $500,000, or sometimes less. Though that’s the max, most short-term business loans are for much smaller amounts—around $20,000.
• Relaxed Borrower Requirements: These loans are much easier to qualify for than LTLs, in that they have low credit score requirements, low business revenue requirements, and minimal time-in-business requirements.
• Higher Interest Rates & Fees: Short-term loans can be an expensive way to borrow capital. If you have bad credit, you might pay more than 50% of the borrowing amount. This means that on a $20,000 loan, you would be charged $10,000 in interest and fees, and will have to pay back a total of $30,000 over the next 12 months (or whatever your term length is).
• Different Fee Structure: STLs usually have a different fee structure than standard term loans. Rather than charging interest in the traditional sense, the borrower is charged a fixed fee, called a factor rate. There’s also usually an origination fee that is taken out of your loan proceeds.
• No Specific Collateral Requirements: You usually won’t have to put down any specific collateral, such as property or specific business assets. However, you will likely have to sign a personal guarantee and/or agree to a blanket lien before the loan is disbursed.
• Shorter Approval Process: Short-term loans usually have a very fast approval process. You can often get approved the same day you apply and see your funds in your account as soon as the next business day. You do still need to fill out some forms and supply some documentation, but overall the approval and funding process is much quicker than with a long-term loan.
• Better For Short-Term Investments: Because you’ll have to repay the loan quickly, short-term loans are better for short-term investments, such as payroll, inventory, or other working capital needs.