You can’t run a business without cash flow. It’s needed to fund operations, purchase inventory, or expand your offerings. Revenue should cover these expenses, but when it doesn’t, debt funding with a business term loan could be the solution.
However, the length of your loan will directly impact your cash flow—longer terms often come with lower monthly payments, but interest rates may increase the loan’s annual percentage rate (APR), or the total cost of borrowing. Shorter-term loans may have higher monthly payments and a lower APR.
In this article, we’ll review what term lengths you can expect for different types of business loans.
What you need to know
- The length of a business loan could depend on factors like the loan type, your business credit, lender policy, and perceived risk.
- Business term loans can have short or long repayment terms, while business lines of credit can give you access to working capital over a shorter period of time.
- Many types of business loans are paid out in one lump sum. A business line of credit is a revolving credit line from which individual draws are subject to approval.
Overview of average business loan lengths
| Type of loan | Best for | Average loan length |
|---|---|---|
| Business term loan | Large, one-time business expenses | 1–10 years |
| SBA 504 loan | Major fixed assets | 10–25 years |
| SBA 7(a) loan | General business purposes | 10–25 years |
| SBA microloan | Startups and underserved businesses | Up to 6 years |
| Business line of credit | Short-term working capital | 1–5 years |
| Invoice financing | Bridging cash flow gaps | 30–90 days |
| Equipment financing | Purchasing business equipment | 2–10 years |
Business term loan
Average loan length: 1–10 years
Best for: Large, one-time business expenses
Business term loans are the simplest, most traditional type of small business loan. The borrower receives their funds as a lump sum payment. The business loan term is preset, and your lender will structure repayment around fixed monthly installments that include a percentage of the principal, a fixed interest rate, and any fees.
The average business loan term length varies from three to five years for smaller loans and up to ten years for larger loans. Business owners can generally choose the term of their loan, but shouldn’t do so without understanding how interest rates affect small businesses in the short- and long-term.
SBA 504 loan
Average loan length: 10–25 years
Best for: Major fixed assets
The Small Business Administration (SBA) is not a direct lender, but it will guarantee a portion of business loan repayments to lenders, allowing you to receive larger loans with lower APRs and interest rates. The 504 loan program is for “long-term, fixed-rate financing for major fixed assets,” (such as real estate or manufacturing equipment) up to $5.5 million. These loans are administered by Certified Development Companies (CDCs), community-based nonprofits that are certified and regulated by the SBA.
SBA 7(a) loan
Average loan length: 10–25 years
Best for: General business purposes
The SBA 7(a) loan program is more flexible than 504 loans, guaranteeing a portion of business loan repayments to lenders of “short- and long-term working capital” up to $5 million. For real estate and equipment, these loans can carry repayment terms of up to 25 years, while working capital loans typically have shorter terms of up to 10 years.
SBA microloan
Average loan length: Up to 6 years
Best for: Startups and underserved businesses
SBA microloans help startups, new businesses, and companies in underserved markets access up to $50,000 when traditional funding is unavailable, with repayment terms ranging from one to six years. Loans are issued through SBA-affiliated intermediaries, from whom you’ll receive your microloan.
Business line of credit
Average loan length: 1–5 years
Best for: Short-term working capital
Business lines of credit offer flexible access to funds up to a set limit. Interest is charged only on the amount used, with average terms ranging from six to eighteen months, though some extend up to five years. Lines of credit are ideal for managing cash flow fluctuations, covering seasonal expenses, or capitalizing on unexpected opportunities.
Did you know?
The Bluevine Line of Credit has multiple repayment plans to help make capital accessible to more businesses. Even if your credit isn’t strong enough to get approved for a traditional business loan, you may be eligible for a weekly repayment plan, which we designed for newer businesses.
Invoice financing
Average loan length: 30–90 days
Best for: Bridging cash flow gaps
Invoice financing involves selling your outstanding invoices at a discount to a factoring company, for which you’ll receive immediate cash. The factoring company then collects the payments due on your invoices, so terms are usually short, within ninety days. This can be particularly useful for B2B companies offering net payment terms, but it significantly reduces your accounts receivable.
Equipment financing
Average loan length: 2–10 years
Best for: Purchasing business equipment
Equipment financing funds specific assets, like machinery, vehicles, medical equipment, and technology. The loan term usually lasts between three and ten years. Once the loan is repaid, you own the equipment outright. Working with vendors that report to business credit bureaus can help strengthen your credit profile while acquiring necessary assets.
Bluevine Tip
You can easily apply for business financing through Bluevine—including the Bluevine Line of Credit and term loans via our partners—with one simple application and no impact to your personal credit.BVSUP-00128
The factors affecting your loan length
Several key factors influence the business loan length you’ll be offered:
- Available collateral: Substantial collateral reduces lender risk, potentially qualifying you for terms of 10 years or more. Unsecured loans have much shorter terms.
- Business creditworthiness: Strong credit demonstrates reliability and may qualify you for longer terms with lower rates. Focus on how to build business credit before applying.
- Lender policies and risk: Traditional banks offer longer terms but have strict requirements. Alternative lenders approve faster but have shorter loan terms.
- Loan purpose and amount: The loan purpose significantly influences the term length. Loans for major investments usually have longer repayment periods.
- The type of loan: Different loan products have standardized term ranges based on their structure and purpose. This may vary by lending institution.
How to choose the best type of loan
Start by defining why you need financing and assessing your qualifications, which include reviewing your business credit score and evaluating your company’s annual revenue and any potential collateral. Consider how urgently you need capital, and for how long. Traditional bank and SBA loans can take weeks or months to approve and issue, while alternative lenders such as credit unions or financial technology companies can issue funds within days.
Loan maturity dates and prepayment penalties
- Loan maturity dates: The maturity date is the date your loan must be fully repaid. Missing this deadline can result in penalties and damage your credit, so plan your cash flow accordingly.
- Prepayment penalties: Some loans have prepayment penalties because repaying your loan early is not as profitable for the lender. (Other loans allow you to save on interest by paying early.)
Grow your small business with Bluevine
The length of business loans ranges from thirty days for invoice financing to up to twenty-five years for SBA loans. Choose your term by matching the business loan terms to your specific needs and repayment capacity. Shorter terms mean higher payments but less total interest, while longer terms reduce monthly obligations but increase overall costs.
Bluevine offers access to business term loans and lines of credit with flexible terms designed for small businesses. Our streamlined application and transparent pricing make securing the funds you need as simple as possible. Get started with Bluevine business loans today.
