Getting small business loans to fund your venture’s launch and expansion plans often requires paying back debt quickly. But rapid repayment strains cash flow, limiting your capacity to scale. Transitioning to longer-term financing better aligns debt payoffs with realistic growth trajectories. This guide will explore specialized SBA loans, merchant cash advances, lines of credit, and other long-term small business lending options.
Introduction
Conventional short-term loans force small businesses to balance major monthly repayments with reinvesting revenue into further growth. But minimizing these repayments through long-term financing vehicles can facilitate scalability. We will compare long-standing SBA loan programs, innovative fintech lending solutions, and lesser-known alternatives to equip your small business with enough runway to achieve its highest potential.
Top Long Term Financing Options
SBA 7(a) Loans
The U.S. Small Business Administration (SBA) guarantees large chunks of 7(a) loans offered through approved partner lending institutions. These loans carry the longest terms of up to 25 years with 10-year average maturities. 7(a) loans from $5,000 to $5 million help startups and existing businesses finance nearly any business purpose.
Key Perks: Low down payments, fixed rates as low as 6%, no collateral requirements for loans under $25,000
SBA 504 Loans
SBA 504 loans finance major fixed asset purchases like real estate or equipment. By covering 40% of the total costs of these purchases, the loans give access to capital intensive scaling opportunities. 504 Loan terms reach 10-20 years carrying fixed interest rates.
Key Perks: Requires only 10% down payment, below market fixed interest rates
Merchant Cash Advances
Merchant cash advances provide lump sum financing repaid as a fixed percentage of future sales. By linking repayments to revenue, cash advances avoid strains from fixed monthly loan dues. Terms often reach 24 months, with higher repayment rates than conventional loans.
Key Perks: Quick approvals, repayment rises and falls alongside revenue
Business Lines of Credit
Business lines of credit grant access to revolving financing as needed up to an approved limit. Minimal monthly payments maintain open access without requiring full pay offs. Draw periods often last 12 months followed by 5 year repayment terms.
Key Perks: Flexible access to capital, low monthly payments during draw period
Long-Term Bank Loans
While most conventional small business bank loans carry shorter 1-5 year maturities, Wells Fargo, Bank of America and others now offer customizable loan terms from under 3 years to over 10 years. Matching cash flows with longer repayment schedules minimizes financial strain.
Key Perks: Fixed rates as low as 3.74%, matching terms to business needs
Revenue-Based Financing
Revenue-based financiers offer expansive 5+ year financing repayable at flexible rates scaling from 2-8% of monthly sales. Long terms and capped repayment ratios keep financing affordable growth for longer periods.
Key Perks: 5-7 year terms, payback capped at fixed percentage of ongoing revenue
What To Consider When Seeking Long Term Small Business Loans
Ideal Loan Amounts And Terms
Here are competitive loan amounts and repayment terms worth considering for long-run small business financing:
Loans: $10,000 – $5,000,000
Terms: 7-25 years
Lines of Credit: $10,000 – $500,000+
Draw Periods: 6-24 Months
Maturities: 5+ years from last draw
Projected Revenue And Growth Plans
Provide realistic sales and growth forecasts showing consistent expansion over 3-5+ years. Then choose loan terms matching projected revenue surges to support new phases.
Credit Score Requirements
Fintech lenders emphasize time in business and projections more heavily. But traditional banks still focus on personal FICO scores, often requiring 680+ scores for approval.
Collateralization Requirements
Only conventional bank loans may require collateral like real estate or equipment to secure financing. All other options rely more on projections for underwriting.
By choosing loan vehicles and terms supporting multi-year business plans, the additional runway and affordability of long term financing empowers taking your venture to new heights.
Who Offer Long Term Financing For Small Businesses?
Top 5 Long Term Lenders
Here are our top recommended sources for accessing long-term small business financing:
| Lenders | Key Products | Terms |
| SBA Participating Lenders | SBA 7(a), 504 Loans | 10-25 Years |
| Kabbage | Lines of Credit | 1-12 Month Draws, 5 Year Repayment |
| Funding Circle | Term Loans | 5 Year+ Maturities |
| Lendio | Multiple Loan Types | Matched to Business Needs |
| Stripe Capital | Revenue-Based Financing | 5-7 Year Terms |
This list highlights both traditional and alternative online lenders accommodating longer-term financing. Expand options by comparing multiply lenders.
Strategic Industry-Specific Lenders
Niche lenders like those below offer strategic expertise alongside long-term loans supporting unique expansion goals:
Restaurants: National Funding, Parafin
Healthcare: Forrester Bank, Paragon Financial
Franchises: ApplePie Capital, Guidant Financial
Consider industry experience as well when choosing business financing partners.
Tips For Qualifying For Long Term Business Loans
Implement these tips to boost eligibility for the most affordable, long-term small business financing packages:
Highlight Multi-Year Opportunities
Emphasize projected growth above 50% across 3-5 years tied to trends, contracts, or concrete expansion plans.
Attain 680+ Personal Credit Scores
While not universally required, strong personal credit bolsters traditional lender approvals.
Have 2+ Years In Business
Established history eases underwriting facilitating access to lower rates and longer terms.
Provide Collateral
Offer available business assets – equipment, property, invoices etc to secure better loan packages.
Following these tips indicates manageable risk and commitment to growth worthy of extended financing.
Alternative Funding For Early Stage Needs
Younger businesses seeking minimal long-term financing can consider options like:
401(k) Business Financing: Gain penalty-free access to 401(k) savings for up to 5 years.
HELOCs: Unlock funds secured against residential equity via low-rate Home Equity Lines of Credit.
Hard Money Loans: Asset backed financing against property, equipment etc. Terms reach 5 years.
Secured SBA Express Loans: While maxing out at 7 year terms, Express Loans offer faster SBA backing with security.
USDA B&I Guaranteed Loans: For rural business, USDA guaranteed loans reach 30 years for major purchases.
Factoring: Sell unpaid customer invoices to financiers at small discounts for flexible funding.
Matching alternative financing solutions to early capital and collateral levels helps bridge longer term financing eligibility.
Conclusion
Extending financial runway by 5-25 years or more through SBA vehicles, lines of credit, merchant cash advances and other long-haul funding sources gives small businesses runway to scale without rapid repayment pressures. Choose loan terms supporting realistic 3-5+ year growth plans and favor financing sources offering strategic flexibility. This facilitates pursuing expansion ambitions unhampered by short-term cash constraints. Savvy small business owners will align patient capital with their likewise patient path to flourishing financial success and independence.
FAQs About Long Term Financing For Small Businesses
What are the main benefits of long term small business loans?
The core benefits of long-term small business loans include aligning major funding payoffs with realistic growth timelines, avoiding rapid repayment burdens straining growth capacity, securing capital for scaling plans like new locations, supporting early stage ventures needing more runway, and restructuring existing debt at more manageable rates or terms.
What credit score is required for SBA loans?
SBA loans granted through traditional lenders like banks require minimum personal credit scores ranging from 660-700+ for approval. Startups or businesses unable to meet these benchmarks would require an eligible cosigner.
Can I get an SBA loan for my new business?
You must be in business for at least two years before getting standard SBA 7(a) or 504 loans. However, the SBA Microloan program does finance startups and early stage businesses with shorter repayment terms.
What are typical interest rates for long term small business loans?
Interest rates for long-term small business loans range widely from around 3.75% for top-tier borrowers with strong credentials up to 30-35% for early stage businesses presenting higher risks. Market rate loans carry rates from 7-15% for most borrowers.
How much cash flow do lenders want to see?
As a rule of thumb, lenders want to see reliable cash flow levels equal to at least 1.2-1.5x the proposed new monthly loan payment amount. Proof of consistent past and projected future cash flows reassure lenders of affordable repayments.