When your business is looking to expand or make a large investment, a long-term business loan is the way to go.
The benefits of long-term loans include more time to repay and lower monthly payments than you’ll find with short-term business loans. The challenge: It may be harder to qualify because you’ll likely need an established business and strong finances.
As with any small-business loan, always compare the costs and terms of each loan carefully.
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SBA loans: The government-backed small-business loans typically have the lowest rates and the longest repayment terms in the market. You work with U.S. Small Business Administration-approved banks and other lenders to qualify for these long-term business loans up to $5 million. Typical repayment period is 10 years for SBA loans for working capital and equipment, and up to 25 years for large assets such as land and facilities.
Bank loans: Traditional lenders provide long-term business loans with repayment terms between five to seven years. Interest rates range based on your qualifications. Besides big banks, you can apply for a long-term bank loan at your community bank or credit union.
Alternative business loans: If you don't qualify for a SBA or bank loan, or you want funding faster, consider loans from alternative lenders, such as Funding Circle or Currency. Both online lenders provide repayments terms up to five years.
One major difference between a long-term business loan and a short-term business loan is monthly repayment costs.
For example, a $100,000 term loan with an 10% annual percentage rate would require monthly payments of $1,322 over 10 years, while the same loan with a five-year term would require monthly payments of $2,125. Figure out your loan’s monthly payment and costs by using NerdWallet’s business loan calculator.
NerdWallet has created a comparison tool of the best small-business loans to meet your needs and goals. We gauged lender trustworthiness, market scope and user experience, among other factors, and arranged them by categories that include your revenue and how long you’ve been in business.
To recap our selections...