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business loan terms

An Overview of Typical Business Loan Terms – What You Need to Know!

Running a small business can be difficult at times. It could especially become too challenging when you have to acquire additional financing for your business

Since traditional business loans involve complex terms and conditions, it could be difficult for small business owners to qualify for them. 

Typical terms on a business loan is another factor that keeps many small business owners away from applying for refinancing options. 

Thanks to small business funding options such as SBA, invoice factoring, and unsecured same-day financing, you can improve your cash flows, upgrade your business, obtain the latest equipment, or better deal with other financial challenges that come your way. 

Depending upon the nature, size, and capacity of your business, you can choose any one of the below-listed options.

What is the Typical Term on a Business Loan?

Simply put, the business term loan is the time duration your lender will allow your business to repay the debt you take on. 

If you’re a small business owner who needs some cash, the first thing you must do is to skim through different available refinancing options. 

As far as the answer to this question ‘what is the typical term on a business loan’ is concerned, it depends on the type of loan you’re applying for, the total amount you’re applying for, and the current status of your business (credit score, time in business, P&L and other financial statements, etc). 

Some financing options allow business owners to settle their debt in a few weeks or months, while others allow long repayment times and schedules. 

Here, it is important to understand that not all small business loans are created alike. They all come with different business loan terms. So make sure you check out the pros and cons of every available option before you choose one for your business needs. 

For your convenience, we’ve put together a list of some of the most prominent funding sources. Also, we’ll see what business loan terms each of these options offer to the borrowers. 

Traditional Bank Loans

After the 2007-2008 financial crisis, banks are lending fewer loans to small businesses. While it is not impossible to acquire funding from a conventional financial institution, the typical term on a business loan can range between 3 and 10 years (which could be a little rigid, taking into account the other challenges small businesses can expect to encounter). 

Also, the loan limit is usually confined and hovers near $400K-$500K. 

As far as the interest rate is concerned, it depends on many factors, including the type and size of the loan, your credit score, etc. 

You can expect funds transfer within 2-months once your application gets approval from the bank. Needless to say, this loan type needs the borrower to offer something as collateral against the loan. 

Equipment Financing

Equipment financing is another popular loan type that comes with a 1 to 5 years repayment term on a business loan. 

Since this type uses equipment as collateral, the loan terms usually do not exceed the total useful life of the equipment. Both conventional, as well as, alternative lenders offer this type of financing option. 

SBA Loans

Securing a loan from SBA is also not as easy as it may sound. It generally takes up to 3-months before you get money into your bank account.

The average amount you can borrow from SBA hovers near $350,000 with up to 25-years or more loan term period. 

There are three types of SBA loans currently available – Standard SBA loans, 504 loans, and microloans. 

The Standard SBA 7(a) loan offers up to 5-10 years loan repayment terms. The SBA 504 loans come with up to 25-years repayment terms, while the typical term on SBA microloans is not more than 6-years. 

Merchant Cash Advance

If your business is able to generate lots of revenue via credit card sales, then merchant cash advances can be your safest bid. 

The typical term on this type of business loan is not more than 18-months, and you can expect to secure anywhere between $5K and $50K. 

Same-Day Direct Funders

Same-day unsecured financers are direct funders that offer instant financing solutions to those businesses that already have a proven track record. 

The best thing about this type of financing is that it comes with flexible terms and conditions. Also, there is no collateral required. 

Business Lines of Credit

The typical term on business lines of credit varies from lender to lender. As a general rule, these loans are available for as low as a 6-months loan term period to up to a 5-years repayment schedule.

There you have them. All of these small business financing options come with unique loan repayment terms and conditions. Make sure you choose a solution that best fits your business needs and policies.

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