Long-Term Small Business Loans: Everything You Need to Know
Long-term business loans are business loans that you repay over a period of one year or longer, usually in monthly installments. The benefits of a long-term business loan are low interest rates and more manageable payments, since payments are spread out over a long time.
Compared to other types of financing, however, you’ll need to have strong qualifications to be able to access long-term loans.
This being said, both banks and alternative lenders offer long-term business financing—meaning you still have the opportunity to access these loans even if you can’t qualify for a bank loan.
In this guide, therefore, we’ll review the best long-term business loan options, as well as everything you need to know to qualify and apply for the right solution for your business.
Top Long-Term Business Loans for 2020
- Wells Fargo: Best for long-term business loans from a bank
- Funding Circle: Best for fast, low-cost funding from an online lender
- Fundation: Best for businesses with at least three employees and average credit
- Opportunity Fund: Best for newer businesses, underserved business owners like women and minorities
- Credibility Capital: Best for quick, affordable loans in lower amounts and terms of three years or less
How Long-Term Business Loans Work
Before we break down our list of the top long-term business loans, let’s briefly review how these products work.
First and foremost, a long-term business loan functions like any type of business term loan—where a lender offers you a fixed amount of capital that you have to pay back (with interest) over a set period of time. Unlike short-term loans, which typically have terms up to 12 months (sometimes as long as 18 months), long-term loans are usually characterized as any loan with a repayment period of 12 months or longer.
Ultimately, there is no official industry standard for what qualifies a “long-term loan,” and therefore, you’ll sometimes see loans with repayment periods between one to five years as “medium-term loans.” To this point, the terms of a long-term small business can range (often based on what you’re using the funds for), reaching up to a 25-year repayment period.
This being said, due to their lengthy repayment periods, long-term business loans typically have lower interest rates and are ideal for funding business growth, refinancing existing debt, or making large purchases like real estate or equipment.
Although the specifics will vary based on the individual product and business lender, generally you can expect these loans to have:
- Loan amounts: With online lenders, usually up to $500,000; bank or SBA loans can reach $5 million
- Interest rates: About 4% to 30%; banks will offer the lowest rates
- Collateral: Often require collateral such as real estate or other assets, as well as a personal guarantee
- Qualifications: Strong credit and financials, as well as a few years in business; banks will have stricter requirements compared to online lenders
Long-Term vs. Short-Term Loans
As we explained above, the most obvious difference between long-term business loans and short-term business loans is the length of your repayment period.
This being said, in addition to having a shorter term length, these products also typically require daily or weekly payments instead of monthly payments.
Overall, although long-term loans will be able to offer the most affordable rates, they won’t always be right for every business and financial need. Plus, as we’ll see with the options below, long-term small business loans can be difficult to qualify for.
Therefore, here’s a comparison of long-term and short-term business loans to keep in mind:
High credit borrowers
Lower credit accepted
Established businesses with strong financials
Younger businesses accepted
One to 25-year term
Three to 18-month term
Daily or weekly payments
4% to 30% APR
8.5% to 80% APR
Best for long-term investments
Best for one-off expenses
5 Top Long-Term Business Loans Options
Now that you have a solid understanding of how long-term small business loans work and how they compare to short-term loans, let’s break down some of the top options on the market.
You can find a quick comparison of all five products in the chart below:
Best Long-Term Business Loan Options
|Lender||Loan Amounts||Interest Rates||Terms||Best for:|
Up to 500,000
Varies based on your qualifications
Highly qualified borrowers who want long-term, affordable financing from a bank
Up to $500,000
4.99% to 22.99%
Six months to five years
Fast, low-cost funding from an online lender with a streamlined application process
Up to $500,000
8% to 30% APR
One to four years
Online-based loans for businesses with at least three employees and average credit
Up to $250,000
5.9% to 29.5%
One to five years
Underserved business owners, new businesses, and those with average or bad credit
Up to $350,000
8% to 20%
Fast, affordable loans with lower amounts and slightly shorter terms
Let’s dive into the details.
1. Wells Fargo
If you have great credit and a profitable business, it’s definitely worth turning to a bank for long-term business loans.
Banks across the country offer long-term financing, but it can help to start with your local community bank. Local bankers understand their local economies well and might be on familiar terms with local small business owners. If you already have a relationship with your local bank, then they might be more willing to trust you with a business loan.
On the other hand, however, if you don’t already have a relationship with a bank in place, you might look to Wells Fargo for long-term business loans.
Wells Fargo is a notably small business-friendly bank—offering a variety of different loan products—including traditional term loans and SBA loans.
In particular, you might consider their Advancing Term Loan, which offers $100,000 to $500,000 to be used for working capital. This loan is secured by your business assets and gives you up to a one-year draw (similar to a business line of credit), after which time the balance converts into a five-year term loan.
Although Wells Fargo doesn’t specify the interest rates on this loan, their website does mention that rates on their unsecured loans start at 7% and vehicle loans start at 5.5%—which gives you some insight into the types of rates you’ll see.
This being said, however, as a bank lender, Wells Fargo will require that you can meet top qualifications in order to access this financing. You’ll want to have at least two years in business, great personal credit (700+), and strong business financials to qualify.
All in all, though, Wells Fargo will be one of the best options for a long-term bank loan—offering the most affordable rates for highly qualified borrowers.
2. Funding Circle
Although some businesses might be able to qualify for a bank loan, many will prefer the speed and more lenient requirements of an alternative lender—in which case, you’ll want to start with the next option on our list—Funding Circle.
Of all the online lenders out there, Funding Circle can perhaps offer rates and terms that are most similar to a bank, but with the streamlined processes alternative lenders are known for.
With Funding Circle, you can expect:
- Loan amounts: $25,000 to $500,000
- Terms: Six months to five years
- Interest rates: 4.99% to 22.99%
- Origination fee: 3.49% to 6.99%
- Repayment: Monthly
In addition, Funding Circle can approve loans and send out an offer in as little as one business day after all documents are received. On average, business owners get their loans within five days. Plus, you can complete the application process online—and, Funding Circle does not charge a prepayment penalty.
This being said, to qualify for a long-term business loan from Funding Circle, you should have:
- A personal credit score of 620 or higher (660 for sole props)
- Two years in business
On the whole, Funding Circle is a great option for businesses looking for long-terms and affordability, but don’t want to wait or can’t qualify for a bank loan.
Next, with Fundation, you’ll find slightly higher interest rates and shorter terms, however, they’re a little more flexible in terms of business loan requirements.
This being said, Fundation offers long-term business loans with:
- Loan amounts: $20,000 to $500,000
- Terms: One to four years
- Interest rates: 8% to 30% APR
- Origination fee: Up to 5%
- Repayment: Bimonthly
Like Funding Circle, you can apply for a Fundation loan quickly and easily online and receive funding in as little as one day and as many as 30 days. On average, Fundation funds businesses within five days.
To qualify for a Fundation loan, you’ll need:
- A personal credit score of at least 600
- Minimum $100,000 in annual revenue
- At least two years in business
- A business bank account with a minimum average bank balance of $2,000
- At least three employees (you can include yourself in this count)
As you can see, Fundation’s minimum credit score requirement is slightly lower than Fundation’s, so although they don’t necessarily offer long-term business loans for bad credit, they certainly offer them for average credit.
Overall, Fundation is a worthwhile online lender for long-term loans, especially if your credit score is closer to 600. On the other hand, however, with a minimum requirement of three employees working at the business, Fundation might not be a viable option for smaller businesses.
4. Opportunity Fund
Opportunity Fund is a little different from Fundation and Funding Circle. Opportunity Fund (who also works with Lending Club) is a microlender that strives to offer long-term business loans to underserved business owners—including women and minorities in low-income communities.
As a mission-focused microlender, Opportunity Fund will have more specific requirements needed to qualify, however, they’re a worthwhile option for a variety of businesses.
On the whole, Opportunity Fund can offer:
- Loan amounts: $2,600 to $250,000
- Terms: One to five years
- Interest rates: 5.9% to 29.5%
- Origination fee: 5.99%
- Repayment: Monthly
To start the application process, you can call Opportunity Fund directly and you’ll work with a dedicated advisor to get everything in order. Generally, Opportunity Fund can finance businesses in three to five days.
This being said, to qualify for one of these long-terms small business loans, you’ll need:
- $50,000 in annual revenue
- One year in business
Opportunity Fund does not have a minimum credit score requirement and will likely weigh your business financials over your credit, especially if your credit isn’t great.
On the other hand, however, as we mentioned above, there are some restrictions associated with this microlender. Opportunity Fund can only work with businesses in certain states and industries—and therefore, they might not be an option for everyone.
If you can apply with Opportunity Fund, though, you’ll find that they can offer the closest option to long-term business loans for bad credit (more so than even Fundation), as well as long-term business loans for startup businesses.
5. Credibility Capital
Finally, you might consider Credibility Capital as one of your best options for long-term small business loans. Of all the online lenders on our list, they offer terms on the shorter side, however, their business financing product is still very competitive with those we’ve discussed thus far.
Overall, Credibility can offer:
- Loan amounts: $25,00 to $350,000
- Terms: One to three years
- Interest rates: 8% to 20%
- Origination fee: Starts at 3%
- Repayment: Monthly
Like many of the other options we’ve reviewed, Credibility’s process is online-based, allowing you to complete the application quickly and easily. In addition, Credibility has no prepayment penalty—they also allow you to use one of their loans to refinance existing debt.
To qualify for a long-term loan from Credibility Capital, you’ll need:
- Two years in business
- Strong personal credit
- To be currently generating revenue
Overall, these requirements are a little vague—and therefore, you might have some flexibility in qualifying with Credibility. For example, if you have strong credit, but your annual revenue is on the lower side, you may still be able to qualify.
This being said, on the whole, Credibility issues long-term business loans that are fast and affordable. You will want to keep in mind, however, that the shorter terms of one to three years mean, in comparison to some of our other options, your monthly payments will be on the higher side.
Before we explain how to apply for long-term business loans, it’s important that we discuss SBA loans.
Although we mentioned SBA loans in regards to Wells Fargo, we did not include SBA loans in our list of the best long-term options because SBA loans do not originate from a single lender.
Instead, SBA loans can be issued by big banks, community banks, and a variety of other SBA lending partners. This being said, although they don’t fit into this comparison per se, they are, in fact, long-term business loans.
Overall, SBA loans have some of the longest terms on the market, with products like the SBA 7(a) loan, that offer terms up to 25 years. In addition, SBA loans are extremely affordable, with interest rates typically ranging from about 6% to 10%.
Like bank loans, however, SBA loans are often difficult to qualify for and slow to fund. In general, you’ll need at least two years in business, a minimum credit score of 640 to 675, and strong business financials to qualify for an SBA loan. Plus, funding can take anywhere from two to three months.
Therefore, like bank loans, SBA loans will not be right for every business—however, if you think you can qualify, you’ll certainly want to consider applying in order to access the low rates and long terms associated with these loans.
With this in mind, if you’re looking for a place to start, you can see if your current business bank offers SBA loans or turn to some of the most active SBA lenders—like Live Oak, Wells Fargo, Huntington, and Celtic Bank.
Compare some of the best SBA lenders in our guide.
How to Apply for Long-Term Business Loans
When it comes down to it, the steps required to apply for a long-term business loan will vary based on the lender you decide to work with. First and foremost, as we discussed with our options above, each lender will have unique qualification requirements, as well as a specific business loan application process.
Generally, banks will have the slowest and most manual processes, often requiring that you visit a branch in-person and provide a variety of physical paperwork. In contrast, online lenders will have expedited, online-based processes that can usually be completed much more quickly—in some cases, in only minutes.
With these lenders, you’ll be able to fill in the required information online and upload the necessary documents. Plus, alternative lenders typically will not ask for as much documentation as a bank will.
All of this being said, regardless of the lender you’re working with, you can increase your chances of qualifying and expedite your time to funding by preparing your application materials ahead of time.
Overall, you should expect to provide:
- Business plan
- Use of proceeds statement
- Business licenses, permits, and approvals
- Personal and business bank statements
- Business financial statements
- Personal and business tax returns
- Personal and business credit score
- Existing debt schedule
- Collateral documentation
The Bottom Line
At the end of the day, if you’re looking to fund a larger financial need—like a renovation, equipment purchase, real estate investment, or debt refinancing—you’ll want to turn to long-term business loans to fulfill that need.
Whether you access these loans from a bank or an alternative lender, they’ll be some of the most affordable options out there—plus, you’ll be able to pay back your debt over a lengthy period of time.
Of course, as we’ve discussed, long-term small business loans can be difficult to qualify for, especially for startups or businesses with bad credit. To this point, if you can’t access a bank or SBA loan, you’ll want to look into some of the online lenders we’ve reviewed.
On the other hand, however, if you can’t qualify for any of these options, you might explore other business funding options—like short-term loans, lines of credit, or asset-based financing.