Long Term Business Loans

As a business owner, it is likely that you will be subject to a large expense somewhere along the line, and oftentimes this large expense can be difficult to afford with your generated revenue alone. When this happens, especially if it is unexpected, getting a long-term business loan is likely to be the best answer to your problem. Not only will you receive the funding you need to finance a large expense, but you will also be able to spread the cost out over a number of years with smaller, more manageable amounts.

What is a long-term business loan?

A long-term business loan is a type of business loan that is paid back in monthly installments, over a period of at least 1 year, typically over 3 to 10 years, although this can be as long as 25 years.

This type of loan offers amounts of up to $500,000 with online lenders or as much as $5 million with banks or the Small Business Administration (SBA), with interest rates ranging anywhere from 4% to 30% depending on the lender.

How do long-term business loans work?

As with any type of term loan, a long-term business loan lender will offer you a set funding amount which you are then required to pay back to the lender, with added interest, over the agreed terms.

Term lengths tend to vary depending on the lender, the loan amount, and how you intend to use the funding.

When would a business need a long-term loan?

There are a number of reasons why a business may seek out a long-term loan. This includes:

• acquiring a business
• commercial real estate purchases
• debt refinancing
• equipment purchases
• expanding a business
• hiring new employees
• improving or remodeling existing business premises
• purchasing commercial vehicle/s
• purchasing inventory or supplies

Can you get long-term business loans with bad credit?

In order to qualify for a long-term business loan, you will typically need a credit score of at least 600, especially if you are looking for a bank loan. You may be able to acquire a long-term business loan with a credit score lower than this with an online lender, although you will need to show your strong business credentials in some other way.

If you are looking for long-term business loans for bad credit, you may have to look towards an alternative lender. Although you will be able to get approval with a credit score lower than 600, they will set much higher interest rates, possibly even reaching as much as 30%.

If you have bad credit, it is always advisable to work in whatever way you can to increase your credit score before you even start applying to business lenders.

How much do long-term business loans cost?

Interest rates can vary hugely depending on the lender, how creditworthy you are as a borrower, and the loan amount. If you are well-qualified for a long-term business loan with an excellent credit history, you may be able to receive interest rates even below 5% with a traditional bank loan. For those with bad credit, they may be much larger.

Can small businesses apply for long term business loans?

Small businesses can apply for long-term business loans, although lenders will typically require you to have been in business for more than 2 years. If you are a startup or a new small business, you will find it a challenge to obtain a long-term business loan, but it is possible.

The best long-term small business loans, whether you are a startup or more established, are offered by the Small Business Administration (SBA). These are particularly popular loans as they are guaranteed by the government for up to 95% so pose a much lower risk to lenders. They also boast competitive interest rates and terms with high loan amounts, although this does mean that there is a lot of competition for this type of loan and so the requirements are particularly strict.

If you are unable to qualify for an SBA loan, alternative lenders also offer long-term small business loans which are easier to qualify for, and you may even qualify if you have been in business for less than two years, you will just have to present a strong business plan and future revenue projections. However, as mentioned above, these lenders will have very high interest rates so you should weigh the costs carefully.

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

Banks

A bank loan is generally the type of long-term business loan that you should look to secure, with their low interest rates and long terms, although it can be particularly difficult to qualify. You will need an excellent credit score, at least 2-3 years in business, and strong annual revenues. If you are lucky enough to qualify for a bank loan, you will find that the application process is lengthy, meaning it could be months until you receive funding, however, they are one of the most affordable types of long-term business loans on the market.

SBA Loans

We touched on these above, but let's look at the specific types.

The most popular long-term SBA loan is the SBA 7(a) program which offers funding amounts up to $5 million with maximum repayment terms of 10 years and can be used for almost any business expense.

The SBA Microloans program offers funding amounts up to $50,000 with maximum repayment terms of 6 years.

They also offer specialized long-term business loans for underserved communities, known as the Community Advantage Loan, and for military veterans or service members, known as the Veterans Advantage program.

Alternative/Online Lenders

If you are looking for quick financing, your best option is likely to be an alternative lender. You will find that you can get fast approval, even with a lower credit score, and funding may even be received within a week.

However, long-term business loans from alternative lenders do come with particularly high interest rates, sometimes exceeding 30%, their loan amounts are typically lower, and you may have to make your repayments in as little as 5 years, so your monthly payments are likely to be much higher.

If you can't meet the qualification requirements of other lenders, such as credit score, annual revenue, and time in business, looking to alternative lenders may be your only option.

How do I qualify for a long-term business loan?

The requirements you need to meet in order to qualify for a long-term business loan will vary depending on the lender, but typically they are:

• you must have a genuine business expense that requires funding
• you, as the borrower, must own at 20%+ of the business
• you must have a credit score of at least 600
• you must have been in business for at least 2 years
• you must be able to provide collateral if your loan amount is more than $100,000

How do I apply for a long-term business loan?

The application process for a long-term business loan also depends on the lender. In general, banks will have the longest application process, asking you to present the relevant paperwork in-person.

Online lenders have a much faster application process with all the relevant documents and information submitted online. It may only take you minutes to complete, and you can often be pre-approved in hours or less. The documentation you will have to submit does vary, but typically includes:

• a solid business plan
• a statement for how the funds will be used
• your business licenses and permits
• bank statements (business and personal)
• financial statements
• tax returns (business and personal)
• credit score (business and personal)
• an existing debt schedule, if applicable
• collateral documentation

A long-term business loan is the perfect financing to cover large business expenses, whether that be to expand your business or cover unexpected costs. They can be a very affordable option if you have a good to great credit score and allow you to repay large loan amounts over a long period of time.

If you are able to qualify for a traditional bank loan this is the most affordable way forward, but with strict qualification requirements, this can be very difficult. Thankfully, there are online lenders who are more lenient with their requirements and so you will find them much easier to qualify with.

At?Acorn Finance, we're here to help you get the funding you need to expand your business. Simply fill out a short application form to receive your pre-qualified offers, choose one that best suits your needs, and we will connect you to the lender so that you can receive your funding with competitive payment options. Start your application by clicking Get Started below.