Methodology
We evaluated more than 14 online small business lenders, focusing on key areas such as affordability, loan options, underwriting requirements and customer experience. Our featured long-term business loans are from a subset of our top-rated alternative lenders that offer repayment terms of up to five years. Advertisers and partners don’t influence our ratings, as our research and editorial team maintains independence in using data-driven methodologies.
Learn more about how Buy Side rates the best small business loans.
What is a long-term business loan?
A long-term business loan is one you repay over an extended period. The typical repayment term is at least five years. In contrast, short-term business loans typically have terms lasting three to 24 months.
Long-term business loans often offer lower monthly payments. This benefit might make them more manageable for businesses looking to fund and expand their operations. These loans can help finance real estate, equipment and renovations or refinance existing debt.
How do long-term business loans work?
Long-term business loans offer access to substantial capital for investing in your company. As with other business loans, you borrow a lump sum and pay it back over time.
Collateral is often required for these loans. When you purchase real estate or expensive equipment, the item you finance can serve as collateral.
Because long-term business loans extend your repayment over five to 10 years or longer, the monthly payments can be more manageable. You might pay more interest over the life of the loan, however.
Long-term vs. short-term business loans
Long-term and short-term business loans can both be helpful for businesses, but they serve distinct purposes.
Long-term business loans might offer larger loan amounts and lower interest or factor rates. These loans are typically used for funding capital projects, purchasing equipment or expanding your business. Depending on the lender, it might take longer to fund a long-term business loan than a short-term loan. Application, approval and funding might take several days to several weeks, although some alternative lenders might be able to fund you within one or two business days. You typically make monthly payments over a period of five years or longer.
Short-term business loans, on the other hand, are helpful for businesses facing funding shortages. They usually offer quick access to cash, with funding often available within one business day. Rates can be higher, and loan amounts are typically lower. Payments can be made daily, weekly or monthly, typically over a period of three to 24 months.
What are long-term business loans used for?
Long-term business loans can be used for various purposes, including equipment, major renovations, technology and other capital expenditures.
These loans can also help businesses expand into new geographical areas or market their products or services to a new customer base.
Businesses might also use long-term loans to expand their operations with major purchases. They might buy a new storefront or equipment or acquire other businesses.
How to get a long-term business loan
To apply for a long-term business loan, follow these steps:
- Determine how much you need: Estimate the amount you need by considering how you plan to use the loan. Note that lenders typically have maximum loan amounts. For example, Fora Financial has a maximum loan amount of $500,000 for long-term business loans.
- Shop around: Consider offers from several lenders, comparing their rates and maximum loan amounts. Many lenders offer prequalification, which provides an estimate of rates and terms before you apply.
- Check your eligibility: Lenders often have specific eligibility requirements, such as a minimum annual revenue or a minimum amount of time in business.
- Prepare paperwork: Long-term business loans might require a significant amount of documentation. Prepare personal and business tax returns, a business plan, bank statements, proof of collateral and other paperwork as requested by the lender.
- Apply for a loan: Apply for your loan online or over the phone. An in-person application might be required in some cases.
- Agree and sign: Receive your loan offer and read the fine print to ensure everything is in order. If so, sign the loan agreement.
- Receive your funding: The final step is to wait for funding. This process can take more time for long-term business loans.
Tips on choosing a long-term business loan
Many lenders offer long-term business loans. Consider these factors to identify the best option:
- Credit and revenue requirements: Lenders often have minimum credit score and minimum annual revenue requirements to qualify for a long-term business loan.
- Maximum loan amount: Lenders usually have a maximum loan amount. Ensure the lender you are considering offers sufficient funding for your business.
- Total cost: Compare the total cost, including interest or factor rates and origination fees, application fees and prepayment penalties.
- Funding speed: Funding speed can vary significantly, with some lenders offering fast funding and others taking several weeks or months.
- Collateral requirements: Collateral is often required for large, long-term business loans. Check with each lender to understand what is needed.
