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Sometimes a few months or a year can be just enough time to repay a small business loan, but for many small businesses, high rates and monthly payments can make short-term loan repayments close to impossible.
Fortunately, some lenders offer long-term small business loans, which give borrowers the opportunity to repay the loan over a longer period of time (typically up to 25 years).
With lower monthly payments and usually good rates, this lending model often provides business owners with a more effective means to finance debt and growth when compared to equity investments.
Long-term business loans certainly do exist but if you’re hoping to score one, you’ll need to have an established business (i.e., no startups or new businesses) and have good business credit.
There are a variety of lending institutions, both traditional and non-traditional, that offer long-term financing, so it’s always best to review all your options, including those offered by your chosen banking institution. However, there are a few lenders that consistently top the charts, and those that follow are known to offer competitive rates, flexible terms, quick access to funds, and positive customer feedback.
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Compare Long-Term Business Loans
|Loan Amounts||$5,000 – $300,000||$25,000 – $500,000|
|Rates (APR)||10% – 35.5%||4.99% – 26.99%|
|Term Lengths||Up to 60 months||Up to 60 months|
|Min. Credit Score||600||620|
|Compare rates from the best small business loan lenders|
3 Companies Offering Long-Term Business Loans
LendingClub is a peer-to-peer lender that offers business owners the capital to finance a variety of activities. The application process is known to be quick (within minutes), and funds are typically available within a few days.
LendingClub offers approved borrowers 1- to 5-year loans for $5,000 to $300,000 at fixed rates between 5.99% and 29.99% based on creditworthiness. For many, these rates are higher than those offered by SmartBiz, but this may be an option for those who do not qualify for an SBA 7(a) or are looking for a bit more flexibility in how they spend the funds.
To be eligible for a business loan through LendingClub, you must be in business for 12 months or more, be able to show at least $50,000 in annual sales, and own at least 20% of your business. Applicants must have at least fair personal credit or better (630 or above), and those with recent bankruptcies or tax liens will be denied.
In many ways, Funding Circle, another peer-to-peer lender, combines many of the best features of SmartBiz and LendingClub, offering business loans that are fast, flexible, and affordable.
Funding Circle offers both short- and long-term loans, with six-month to five-year terms available. Loan amounts range from $25,000 to $500,000, making them the lender with the highest limits, though they don’t have the longer terms available from LendingClub and SmartBiz.
The application is standard and takes about ten minutes. A decision is made within 24 hours. If approved, borrowers can expect to receive an interest rate between 4.99% and 26.99%.
To qualify for a long-term loan through Funding Circle, the applicant must have a credit score of 620 or higher and be able to show a minimum of two years’ worth of business tax returns, one year of personal tax returns, and six months of the most recent business bank statements. Additionally, applicants must complete a business debt form, a personal guarantor form, and additional documentation as requested.
You can see a specific comparison of LendingClub and Funding Circle here.
SmartBiz offers 10- to 25-year Small Business Association (SBA) 7(a) loans from $30,000 to $5,000,000 with interest rates that typically range between 6.50% and 8.75% (interest rates are based on the prime rate plus 1.50% to 3.75%).
The application process is quick, and funds are typically available within seven days of approval. SmartBiz only approves applications for businesses that are within SBA-approved industries, a list of which can be found on the SBA site. Further, applicants must be able to show that the business has been operational for at least two years, is based in the U.S., and is owned by a U.S. resident or lawful permanent resident who is 21 years of age or older.
Further requirements are based on the type of loan, and a full list of requirements can be found on the SmartBiz site. However, applicants for Working Capital and Debt Refinance Loans must have a personal credit score above 650, and applicants for the Commercial Real Estate Loan must have a personal credit score above 675.
Long-term business loans can be a great way to finance important business growth, including hiring staff or purchasing new equipment. And though they often carry lower rates and more manageable payments, it’s important to know that they are often reserved for those with good or excellent credit. For that reason, long-term business loans may not be the best for new businesses or those with a troubled credit history.
Another thing to keep in mind is that long-term business loan lenders often include specifications as to how the funds are used, which can make them less flexible than other borrowing opportunities. Further, a long-term loan is a long-term bill (i.e., it can represent a reoccurring bill for several years), and as such, borrowers should keep that in mind when determining if long-term loans are the right decision.