Long-term loans may be the best bet for your small business. Find out more about how they work, their benefits, and how SmartBiz Bank® may be able to help with the funding that you need.
What are long-term business loans?
Long-term loans are a type of term loan that typically have a life of at least 10 years, paid down in monthly installments. Longer repayment terms typically lower the monthly obligation since the total gets broken down into more segments. This type of loan may be especially useful when planning for steady growth over time instead of addressing immediate cash flow needs.
SmartBiz Bank offers several types of long-term loans, including SBA loans. Since the federal government guarantees a portion of SBA loans, business owners may find more favorable rates.
Pros and cons
All types of outside funding have pros and cons. The primary benefit of long-term loans is that they typically come with competitive interest rates and monthly payments. Also, since the payments may be easier to manage, they may help you improve your business credit score. Long-term loans also provide an added layer of financial flexibility, as you may be able to pay the loan off faster if cash flow improves.
However, long-term loans may have stricter eligibility requirements and sometimes take longer to fund than short-term loans. This is because lenders need to minimize their risk, so they look for financially healthy borrowers and businesses.
Long-term loans typically result in business owners repaying more money over the life of the loan. While lower interest rates may reduce the monthly obligation, they still may lead to a higher total being repaid to the lender.
Since securing a long-term loan may take longer, it may be even more important for small business owners to prepare for financing well before they urgently need capital. Applying for a loan in an emergency may force you into obtaining a loan with less favorable terms.
Digital lending platforms have worked to shorten the closing time for many types of loans. Working with an online lender may help you get the funds you need faster than going through traditional paper-based application processes.
Uses of proceeds
Long-term loans are often used for several purposes, including working capital, debt refinance, and more.
Working capital is a broad term to describe things like adding inventory, purchasing equipment, hiring more employees, expanding marketing programs, and financing operating expenses. It may also be used to launch or expand an e-commerce platform, upgrade your software, or to invest in automation.
Refinancing existing debt like merchant cash advances, short-term business loans, and business credit cards is also a great way to save. You’ll make room for more available cash flow so that you may focus on running your operations.
Terms, rates, and repayment periods
Because long-term loans are intended for large-scale projects, they’re usually associated with more substantial amounts. Applying through SmartBiz Bank? You might be eligible for an SBA 7(a) commercial real estate loan from $30,000 up to $350,000, depending on your use of proceeds.
The repayment term of a long-term loan typically varies anywhere from 3 to 25 years, typically falling at or above 10 years, and rates may be fixed or variable.
It’s important to think about cash flow when seeking any type of outside funding, especially a long-term loan. If a monthly repayment is going to place excessive strain on your cash flow, it may be wise to consider other alternatives, such as lines of credit or alternative funding options.
How to apply
Applying for a long-term loan is a matter of demonstrating your eligibility. The process will usually entail presenting paperwork like your personal and business tax returns, financial statements, balance sheets, and collateral documents. In most cases, especially for SBA loans, the business must be in operation for at least two years with good credit, no recent bankruptcies or foreclosures, and sufficient cash flow to cover the cost of the loan payments.
At SmartBiz Bank, we’ve streamlined the process so you are able to complete our online application easily at your convenience and receive your funds as soon as possible. Find out if you pre-qualify today.
FAQs
How do long-term business loans help support business expansion?
Long-term business loans provide businesses with access to capital that may be repaid over an extended period, typically helping reduce monthly payment pressure. This financing is often used for major investments such as equipment purchases, facility expansions, technology upgrades, and hiring initiatives. Longer repayment terms can help businesses preserve working capital while pursuing growth opportunities. When used strategically, these loans may support more sustainable expansion.
What credit score is needed to qualify for a long-term business loan?
Credit score requirements vary depending on the lender, loan type, and overall financial profile of the business. Many traditional lenders prefer borrowers with good to excellent credit, often starting around the high-600s. However, lenders also evaluate factors such as revenue, cash flow, time in business, and existing debt obligations. Strong financial documentation may sometimes help offset lower credit scores.
How long are repayment terms for business growth loans?
Repayment terms for long-term business loans vary, depending on the loan structure and purpose. Equipment financing may have shorter terms, while some other types of long have longer terms. The repayment schedule is typically designed to align with the expected lifespan or value of the investment being financed. Longer terms generally result in lower monthly payments but typically increase the total interest costs over time.
What is the difference between a long-term loan and a business line of credit?
A long-term loan typically provides a lump sum of capital that is repaid over a fixed schedule with regular payments. A business line of credit, on the other hand, allows businesses to draw funds as needed up to a set limit. Long-term loans are commonly used for larger planned investments, while lines of credit are often used for short-term working capital or managing cash flow fluctuations. Each financing option serves different business needs depending on flexibility and repayment structure.
