Considering a long-term loan for your small business? Learn why they can be the best bet for growing your small business, all about the application process, and how SmartBiz® can help.
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. When the repayment terms are long, the associated monthly payments are smaller since the total you owe is broken down into more segments. These are most useful when you’re planning for steady growth over time, instead of addressing immediate needs.
SmartBiz can help you obtain a specific type of long-term financing, an SBA loan. SBA loans are known as the “gold standard” in small business lending due to low rates, long terms and very low payments. Additionally, they’re secured by the US Small Business Administration. This means banks face less risk of default and are able to offer more competitive terms.
Pros and Cons
The advantage of taking out long-term loans is that they come with low interest rates and monthly payments. They’re sustainable and have a positive impact on your business cash flow. Since the payments are easier to manage, they can help build your business credit score. Most long-term loans can be used for a variety of purposes.
On the other hand, some challenges that small businesses face when applying for a long-term loan is that they have stricter eligibility requirements and longer time-to-funding on average than short-term loans. This is because lenders need to minimize the risk of making these loans, so they look for financially healthy borrowers and businesses.
Uses of Proceeds
Working capital is a broad term to describe activities like adding inventory, purchasing equipment, hiring more employees, expanding marketing programs, and financing operating expenses.
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 you can focus on running your operations. Learn more about business cash flow and how you can improve it.
Commercial real estate can also be refinanced or purchased using a long-term loan. Whether you have an existing mortgage or are looking to expand into a new location, taking out a long-term loan can be a wealth-building solution.
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? You might be eligible for an SBA 7(a) commercial real estate loan from $30,000 up to $5 million, depending on your use of proceeds.
The repayment term of a long-term loan can vary anywhere from 3 to 25 years, typically falling at or above 10 years. Rates can also be set at values ranging from 4% to as high as 80% or even more, and can be fixed or variable.
SBA loans offered through SmartBiz bank partners have a variable interest rate. It’s made up of the Prime Rate, which is set by the Federal Reserve, plus 1.5%-3.75% depending on the loan amount:
- Prime Rate plus 1.50% to 2.75% for commercial real estate loans $500,000 - $5 million
- Prime Rate plus 2.75% to 3.75% for loans $30,000 - $350,000
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 2 years with good credit, no recent bankruptcies or foreclosures, and sufficient cash flow to cover the cost of the loan payments.
At SmartBiz, we’ve streamlined the process so you can complete our online application easily at your convenience and receive your funds as soon as possible. We match you with the lender who is most likely to provide the best fit for your business. See if you pre-qualify in 5 minutes and get started today!
Learn more about your status even before starting your application by trying our free, online educational tool called SmartBiz Advisor™. See how your business stacks up against lenders’ criteria so you can increase your likelihood of being approved.
* The information provided through SmartBiz Advisor, including the Loan Ready Score, is for educational purposes and is not the same as scores used by lenders for credit decisions. SmartBiz Advisor is not a financial or legal advisor as defined under federal or state law. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.