Typical Small Business Loan Repayment Terms

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Information
in
the
term
loan
articles
is
provided
for
general
information
only,
does
not
constitute
financial
advice,
and
does
not
necessarily
describe
Biz2Credit
commercial
financing
products.
In
fact,
information
in
the
term
loan
articles
often
covers
financial
products
that
Biz2Credit
does
not
currently
offer.

In
this
article:

How
do
small
business
loan
repayment
terms
work?

Small
business
loan
repayment
terms
describe
the
amount
of
time
borrowers
have
to
repay
their
loan.
The
loan
term
determines
how
many
monthly
payments
are
needed
to
repay
the
loan
and
the
amount
you’ll
have
to
pay
each
month.

Small
business
loan
repayment
terms
vary
based
on
the
type
of
loan,
the
lender,
and
the
creditworthiness
of
the
borrower.

Of
course,
the
loan
term
isn’t
the
only
factor
to
consider.
Other
aspects
of
a
loan
agreement
that
affect
a
borrower’s
repayment
schedule
include:

Servicer

A
loan
agreement
typically
refers
to
the
borrower
(the
individual
that
took
out
the
loan)
and
the
servicer
(the
financial
institution
responsible
for
the
financing
process).
The
servicer
is
the
institution
that
issues
the
initial
funds
and
collects
payments
on
the
loan.

Servicers
can
be
traditional
lenders,
like
banks
or
credit
unions,
or
they
can
be
alternative
lenders
or
online
lenders.

Interest
rates

Almost
all
financing
options
include
an

interest
rates
in
the
small
business
loan
repayment
terms.
The
interest
rate
is
the
cost
of
the
loan.
That
is,
the
amount
you
have
to
repay
on
top
of
the
money
you
borrowed.
Interest
rates
can
be
fixed,
where
they
stay
the
same
for
the
whole
loan
term,
or
they
can
be
variable,
where
they
fluctuate
based
on
the
market
rate.

Your
interest
rate
will
be
based
on
your
credit
score,
the
lender’s
policies,
and
the
amount
you
borrowed.
Small
business
owners
with
a
good
credit
history
are
more
likely
to
get
lower
interest
rates
than
borrowers
that
have
a
bad
credit
score.

Annual
percentage
rate
(APR)

Annual
percentage
rate,
or
APR,
is
the
amount
borrowers
actually
pay
for
the
loan
over
the
course
of
a
year.
APR
is
slightly
higher
than
the
interest
rate
because
APR
includes
all
fees
and
costs,
including
broker
fees,
closing
costs,
processing
fees,
underwriting
fees,
and
document
fees.

Prepayment
penalty

Some
loan
agreements
include
a
prepayment
penalty,
which
is
a
fee
charged
if
you
pay
off
your
debt
before
the
end
of
the
small
business
loan
repayment
term.
Some
prepayment
penalties
also
apply
if
you
make
extra
payments,
even
if
the
loan
isn’t
being
paid
off
in
full.

Most
prepayment
penalties
are
a
percentage
of
the
loan
amount
and
decrease
over
the
term
of
the
loan.
If
there
is
a
prepayment
penalty
on
a

small
business
loan,
it
will
be
included
in
the
loan
documents.

Types
of
business
financing
options

One
of
the
things
that
contributes
to
small
business
loan
repayment
terms
is
the
type
of
financing
you
use.
There
are
several
business
financing
options
available
for
small
business
owners.

Choosing
the
right
loan
for
your
business
depends
on
how
you
will
use
the
money,
the
amount
you
need,
and
the
lender
you
choose.
Many
small
business
owners
work
with
alternative
lenders,
like

Biz2Credit,
over
traditional
lenders
because
they
offer
more
loan
programs
and
can
typically
offer
better
repayment
terms
than
traditional
banks.

Term
loans

A
business
term
loan
is
a
type
of
business
financing
where
the
borrower
receives
a
lump
sum
of
cash
upfront
and
pays
the
loan
back
with
monthly
payments.
The
lender
sets
the
repayment
terms
based
on
your
creditworthiness
and
the
amount
of
the
loan.

Term
loans
can
be
used
for
large
purchases
like
buildings,
equipment,
and
vehicles.
They
are
also
used
for
business
owners
in
need
of
working
capital,
inventory,
payroll
funding,
or
everyday
operating
expenses.

Advantages
of
a
term
loan
include
a
predictable
repayment
schedule
and
lower
interest
rates
than
other
financing
options.

Typical
repayment
terms
for
small
business
term
loans:

• 
  Repayment
  term
  –
  3-36
  months
  for
  
  short-term
  and
  medium-term
  loans;
  up
  to
  10
  years
  for
  long-term
  loans
  (some
  companies
  will
  benefit
  from
  longer
  repayment
  term)
• 
  Loan
  amount
  –
  Up
  to
  $500,000
• 
  Interest
  rate
  –
  Start
  at
  7.99%,
  depending
  on
  creditworthiness
• 
  Funding
  time
  –
  as
  little
  as
  72
  hours

Working
Capital
Financing
or
Revenue-Based
Financing

Working
capital
financing
or
revenue-based
financing
are
small
business
financing
options
that
can
provide
capital
to
entrepreneurs
looking
to
supplement
cash
flow,
implement
growth
strategies,
make
necessary
repairs
or
replacements,
or
cover
monthly
operating
expenses.
There
are
different
types
of
working
capital
loans,
so
choosing
the
best
one
depends
on
the
type
of
business
using
the
funds.

MCA

A

merchant
cash
advance
(MCA)
isn’t
a
loan—
it’s
a
financing
option
you
receive
a
cash
advance
in
exchange
for
future
credit
card
or
debit
card
sales.
The
repayment
terms
for
a
merchant
cash
advance
are
more
flexible
than
most
business
loan
programs
because
payments
are
tied
directly
to
your
incoming
business
revenues
instead
of
the
way
a
loan’s
amortization
schedule
requires
consistent
payments.
So
if
your
business
sees
a
decline
in
revenue,
you
may
benefit
from
longer
repayment
time
compared
to
with
a
loan.
However,
it’s
also
important
to
note
that
MCA
financing
will
usually
require
payments
be
made
more
frequently
than
traditional
monthly
loan
payments.
MCA
payments
are
often
daily,
weekly,
or
bi-monthly,
so
that
it
is
easier
to
track
against
real
revenues
generated
by
the
business.

MCAs
can
be
a
great
financing
tool
for
any
small
business
that
does
substantial
credit
card
sales
or
debit
card
business,
like
retail
stores
and
restaurants.
The
financing
costs
of
a
merchant
cash
advance
are
calculated
using
a
factor
rate,
not
an
interest
rate.
Cash
advances
offer
more
flexible
eligibility
requirements
so
they
are
a
good
fit
for
entrepreneurs
with
a
poor
credit
history
or
no
collateral.

Typical
repayment
terms
for
merchant
cash
advances:

• 
  Repayment
  term
  –
  no
  fixed
  repayment
  term
  (tracks
  business
  revenues)
• 
  Financing
  amount
  –
  Up
  to
  $500,000
  or
  greater
• 
  Factor
  rate
  –
  Start
  at
  1.1
• 
  Funding
  time
  –
  as
  little
  as
  one
  business
  day

Invoice
Factoring
and
Invoice
Financing

Invoice
financing
and
invoice
factoring
are
types
of
business
lending
that
use
the
business’s
accounts
receivables
as
collateral
for
a
cash
advance.
Sometimes
people
use
these
terms
interchangeably,
but
invoice
factoring
and
invoice
financing
are
actually
different
funding
programs.

Invoice
factoring
works
when
a
business
sells
its
unpaid
invoices
to
a
factoring
company,
which
then
collects
on
the
invoice.
With
invoice
financing,
the
unpaid
invoices
still
act
as
collateral,
but
the
burden
of
collection
falls
on
the
business.
Similar
to
a
merchant
cash
advance,
invoice
factoring
and
financing
are
expensive
means
of
securing
capital,
so
they
are
best
for
borrowers
that
have
exhausted
other
cost-effective
options.

Typical
repayment
terms
for
invoice
financing
and
invoice
factoring:

• 
  Repayment
  term
  –
  not
  predetermined,
  usually
  30
  to
  90
  days
• 
  Loan
  amount
  –
  Up
  to
  100%
  of
  the
  unpaid
  invoice
  balances
• 
  Financing
  fees
  –
  Processing
  fee
  of
  3-5%,
  plus
  a
  factoring
  fee
  of
  1
  –
  2%
• 
  Funding
  time
  –
  24
  –
  72
  hours

Government-backed
financing

Some
loan
programs
offer
a
guarantee
from
the
government,
which
reduces
the
risk
for
the
lender
and
improves
a
borrower’s
odds
of
getting
approved
and
having
a
lower
interest
rate
and
down
payment.

SBA
loans

SBA
loans
are
a
type
of
business
financing
where
the
loan
amount
is
partially
backed
by
the

U.S.
Small
Business
Administration.
SBA
loans
can
be
used
for
startups,
operating
expenses,
franchise
financing,
large
purchases,
expansion,
and
debt
refinancing.

Some
advantages
of
SBA
loans
are
lower
interest
rates,
lower
down
payments,
and
longer
repayment
terms.
There
are
several
SBA
loan
programs,
but
some
of
the
most
common
are
listed
below.

• 
  SBA
  7(a)
  Loan
  –
  SBA
  7(a)
  loans
  are
  the
  most
  common
  SBA
  loan
  program
  for
  small
  business
  owners
  and
  approve
  borrowers
  for
  loans
  up
  to
  $5
  million.
  The
  eligibility
  requirements
  include
  three
  years
  of
  business
  income
  tax
  returns,
  a
  real
  estate
  schedule,
  and
  two
  years
  of
  personal
  tax
  returns
  for
  business
  owners.
• 
  SBA
  504
  loan
  –
  504
  loans
  are
  good
  for
  entrepreneurs
  looking
  for
  long-term,
  fixed-rate
  financing
  to
  purchase
  or
  maintain
  major
  fixed
  assets.
  The
  SBA
  works
  with
  Certified
  Development
  Companies
  (CDCs)
  to
  approve
  these
  loans
  for
  for-profit
  U.S.
  companies
  with
  an
  average
  net
  income
  of
  less
  than
  $5
  million.
  504
  loan
  funds
  can
  be
  approved
  for
  up
  to
  $5
  million
  for
  a
  single
  project
  or
  up
  to
  $16.5
  million
  for
  certain
  energy
  projects.
• 
  SBA
  Microloans
  –
  Microloans
  provide
  certain
  small
  business
  owners
  and
  nonprofit
  childcare
  businesses
  with
  loans
  up
  to
  $50,000
  to
  cover
  startup
  costs
  or
  expansion
  costs.
  The
  Microloans
  are
  issued
  through
  pre-approved
  lenders
  that
  ultimately
  determine
  the
  interest
  rates
  and
  repayment
  terms.
  The
  maximum
  term
  for
  an
  SBA
  Microloan
  is
  six
  years.

Typical
repayment
terms
for
SBA
loans:

• 
  Repayment
  term
  –
  3
  –
  25
  years,
  depending
  on
  the
  program
• 
  Loan
  amount
  –
  Up
  to
  $5
  million,
  depending
  on
  the
  program
• 
  Interest
  rates
  –
  Base
  rate
  (usually
  Prime
  rate),
  plus
  2.25%
  to
  4.75%
  for
  7(a)
  loans
• 
  Funding
  time
  –
  30
  –
  90
  days

Revolving
credit
options

Revolving
credit
is
a
type
of
financing
where
the
borrower
is
approved
for
a
maximum
credit
line
and
then
can
withdraw
funds
and
make
payments
repeatedly
within
the
credit
limit
and
repayment
terms.

Business
credit
card

Business
credit
cards
can
be
a
great
financing
tool
for
small
business
owners.
They
work
like
personal
credit
cards
but
using
business
credit
cards
will
not
affect
your
personal
credit
report.
Advantages
of
a
business
credit
card
include
the
opportunity
to
build
better
credit
history
and
keep
business
expenses
separate
from
personal
finances.

Typical
repayment
terms
for
business
credit
cards:

• 
  Repayment
  term
  –
  Open-ended,
  and
  reviewed
  annually
• 
  Loan
  amount
  –
  Maximum
  credit
  line
• 
  Interest
  rates
  –
  Varies
  depending
  on
  credit
  score,
  typically
  starting
  at
  15%
• 
  Funding
  time
  –
  Upon
  approval

Business
lines
of
credit

A
business
line
of
credit
allows
you
to
be
approved
for
a
predetermined
credit
amount,
then
draw
on
that
credit
line
similar
to
how
you
might
use
a
credit
card.
Business
lines
of
credit
are
a
popular
financing
tool
for
entrepreneurs
that
are
interested
in
growing
an
established
business
credit
score
because
they
are
easier
to
get
than
traditional
business
loans.

Repayment
of
a
line
of
credit
can
be
tricky,
especially
if
you
use
it
often.
This
is
because
each
time
you
use
your
line
of
credit
(known
as
a
‘draw’)
you
are
starting
a
new
financing
transaction.
These
each
have
their
own
terms
and
conditions,
including
repayment
rules.
If
you
are
thinking
about
using
a
line
of
credit
for
financing,
make
sure
you
read
the
repayment
rules
carefully.
It’s
also
important
to
understand
that
lines
of
credit
can
be
callable
in
some
cases,
which
means
the
line
servicer
would
have
the
right
to
demand
full
repayment
of
all
outstanding
draws
from
that
line.

Typical
repayment
terms
for
business
lines
of
credit:

• 
  Repayment
  term
  –
  up
  to
  five
  years
• 
  Amount
  –
  up
  to
  $250,000
• 
  Interest
  rates
  –
  10
  –
  99%,
  depending
  on
  creditworthiness
• 
  Funding
  time
  –
  1
  –
  3
  business
  days

What
are

good
repayment
terms?

It’s
impossible
to
classify
repayment
terms
as
either
good
or
bad
because
their
value
depends
on
your
business’s
unique
circumstances.
Repayment
periods
are
dependent
on
the
type
of
loan,
the
lender,
the
use
of
the
funds,
the
borrower’s
credit
history,
the
business’s
annual
revenues,
and
the
amount
of
the
loan.

When
shopping
for
the
best
small
business
financing
option,
repayment
terms
are
one
of
the
most
important
factors
to
consider
because
they
affect
how
long
you
will
be
paying
on
the
debt.

Borrowers
that
have
better
credit
scores
have
more
negotiating
power
when
it
comes
to
repayment
terms,
but
any
individual
can
ask
for
better
small
business
loan
terms
during
the
application
process.

Shorter
repayment
terms
may
benefit
your
small
business
if:

• You
  own
  a
  startup
  company
  or
  are
  a
  new
  business
  owner
  and
  expect
  annual
  revenues
  to
  significantly
  increase
  in
  the
  next
  12
  –
  24
  months.
• You’re
  interested
  in
  using
  short-term
  business
  loans
  to
  improve
  your
  business
  credit
  score.
• Your
  business
  needs
  a
  one-time
  influx
  of
  cash
  to
  purchase
  inventory
  in
  bulk
  or
  launch
  a
  new
  marketing
  campaign.
• If
  your
  loan
  agreement
  has
  a
  high
  interest
  rate,
  paying
  the
  loan
  off
  early
  will
  save
  you
  money.

Longer
repayment
terms
may
benefit
your
small
business
if:

• Cash
  flow
  is
  a
  concern,
  and
  your
  business
  would
  benefit
  from
  a
  smaller
  monthly
  payment.
• The
  loan
  was
  used
  to
  make
  a
  large
  purchase,
  like
  with
  
  equipment
  financing
  or
  commercial
  real
  estate
  loans.
• You
  plan
  to
  refinance
  the
  loan
  in
  the
  future
  when
  market
  conditions
  or
  the
  business
  has
  established
  more
  credit
  history.

Conclusion

Small
business
loan
repayment
terms
tell
a
borrower
how
many
payments
will
be
required
to
pay
off
their
debt,
so
it
is
important
to
understand
what
typical
loan
terms
look
like
before
applying
for
financing.
Loan
terms
depend
on
the
type
of
loan,
the
lender,
the
amount
of
loan,
and
the
borrower’s
creditworthiness.

The
best
business
loan
for
your
business
is
one
that
has
repayment
terms
that
fit
your
business’s
short-term
and
long-term
financial
goals.
To
explore
different
financing
options
and
find
the
right
small
business
loan
repayment
terms,
reach
out
to

Biz2Credit
today.

Marie
Bibum
worked
with
the
experts
at
Biz2Credit
to
get
approved
for
a
small
business
loan
that
helped
her
keep
operations
going
at
her
Washington
D.C.
pharmacy.

FAQ

What
is
the
average
repayment
period
on
a
small
business
loan?

That
average
terms
for
a
small
business
loan
are
3-36
months
for
short
to
medium
term
loans,
and
up
to
10
years
for
longer
loans.

How
are
small
business
loans
repaid?

Small
business
term
loans
are
repaid
through
monthly
payments
that
last
for
the
life
of
the
loan.

How
much
is
the
monthly
payment
for
a
$100k
business
loan?

The
payment
amount
will
vary
depending
on
the
interest
rate
you
receive
and
the
length
of
the
term.
A
high
interest
rate
and
a
short-term
loan
will
have
higher
monthly
payment
amounts
than
a
longer
term
or
a
lower
interest
rate.

What
happens
if
I
can’t
pay
back
my
small
business
loan?

If
you
can’t
pay
back
your
small
business
loan,
the
lender
may
seize
any
collateral
that
was
used
to
secure
the
loan
or
may
take
legal
action.
Regardless,
it
will
damage
your
business’s
credit
and
reputation.

Do
you
have
to
pay
back
SBA
loans?

Yes!
SBA
loans
are
backed
by
the
Small
Business
Administration
up
to
a
certain
percentage
of
the
loan
amount
to
encourage
banks
to
issue
these
loans,
but
business
owners
are
still
required
to
pay
the
loan
back
fully
with
interest.

Frequent
searches
leading
to
this
page

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typical
small
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terms,
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term,
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