A business loan term is how long you have to repay the money, and it depends mostly on the type of funding. Revenue-based financing usually runs from several months to about 18 months, each draw on a line of credit is repaid over weeks or months, equipment financing commonly runs 2 to 7 years, and SBA 7(a) loans run up to 10 years, or up to 25 when they finance real estate. Business loan terms also means the rest of the offer: the amount, the cost, the payment and how often it is due, the fees, the collateral, any personal guarantee and what happens if you pay early.
Average business loan term by type of funding
There is no single average business loan term, because a nine-month advance and a 25-year real estate loan both count as business financing. The table gives typical business loan lengths for each product, and the sections below explain each one with its source.
| Type of funding | Typical term | How it is repaid |
|---|---|---|
| Revenue-based financing | Several months to about 18 months | A set daily or weekly payment until the agreed total is paid |
| Line of credit | Each draw repaid over weeks or months | Weekly or monthly payments on what you have drawn |
| Equipment financing | Commonly 2 to 7 years, matched to the equipment's useful life | Fixed payments, usually monthly |
| SBA 7(a) loan (for reference) | Up to 10 years, up to 25 for real estate | Monthly payments of principal and interest |
| SBA 504 loan (for reference) | 10, 20 or 25 years | Fixed-rate payments over the term |
| SBA-equivalent and bank loans through our partners | Set by the partner, measured in years | Monthly payments |
| Commercial equity loan | Commercial property loans generally run 5 to 25 years | Installments on a lump sum, or payments on what is drawn from a line |
Revenue-based financing: several months to about 18 months
Revenue-based financing is a merchant cash advance. A funder buys part of your future sales, pays for them now, and collects a set daily or weekly payment, sized on your usual revenue, until the agreed total has been paid. The offer states the term and the payment, and the term is often several months to about a year and a half. A Federal Reserve study of online lender websites published in 2019 found that merchant cash advances are generally repaid in 3 to 18 months.
The term on an advance works differently from the term on a loan. The total you repay is the amount funded multiplied by the factor rate, and it is fixed on the day you sign, so the term decides how many payments that total is split into rather than how much it costs. Our guide to how factor rates work shows how to read the rate and the total together. For how they compare with other money repaid within a year or two, see our guide to short-term business loans.
Lines of credit: each draw repaid over weeks or months
A line of credit is revolving. The funder sets a limit, up to $2,000,000 for the lines we place, you draw what you need, and you repay each draw with weekly or monthly payments over weeks or months. As you repay, that room opens up again. A line therefore has two time limits, how long the line stays open and how long each draw has to be cleared, and both are written into the agreement. You pay only on what you draw, and some programs reduce the fee when a draw is paid off early. Our comparison of a line of credit vs a term loan has a worked example of each.
Equipment financing: matched to the equipment's life, often 2 to 7 years
Equipment loans are usually tied to how long the equipment is expected to last. NerdWallet's guide to equipment financing puts the usual range at two to seven years. The IRS depreciation tables give a rough sense of how long common assets are expected to serve, since Publication 946 lists cars, trucks and office machines such as copiers as 5-year property and office furniture and fixtures as 7-year property. A tax recovery period is a rough guide to working life, so treat it as a starting point for the term you ask for. The equipment usually secures the financing, and offers typically come back within one to two business days. Our guide to how equipment financing works covers down payments, leases and the tax side.
SBA 7(a) and 504 loans: up to 10 years, or 25 for real estate
The SBA publishes its loan terms, which makes them a useful reference for long-term business lending. Under the SBA's 7(a) terms and conditions, a 7(a) loan runs for the shortest appropriate term given the borrower's ability to repay, ten years or less unless it finances real estate or equipment with a useful life beyond ten years, and no more than 25 years. The 504 loan program offers 10, 20 and 25-year terms on fixed-rate financing for major fixed assets, such as buildings, land and machinery with at least ten years of useful life left. We do not place SBA loans, so these figures are here for reference. Our guide to SBA loan requirements covers who qualifies and what the application asks for.
SBA-equivalent and bank loans: the partner sets the term
Through our lending partners we place SBA-equivalent loans and conventional bank loans. They follow the shape of SBA lending, with a larger amount repaid monthly over years, but they sit outside the SBA program, and the partner decides the term, the rate and the structure. They can also pay off existing advances. They take weeks rather than days, since the partner reads tax returns, a personal financial statement and a schedule of existing debts. Our SBA-equivalent and bank loans page has the details, and our guide to business term loans covers how lenders price and approve a loan repaid over years.
Commercial equity loans: years, sometimes with a balloon
A commercial equity loan borrows against commercial real estate the owner already holds, either as a lump sum repaid in installments or as a line drawn as needed. NerdWallet's overview of commercial real estate loans says repayment terms on commercial property loans generally range from 5 to 25 years. It adds that many are balloon loans, where the monthly payment is worked out over a longer amortization period than the term, and the remaining balance comes due when the term ends. Our guide to commercial equity loans covers loan-to-value limits and second-position loans.
What the other business loan terms on an offer mean
The length is one line of the offer. These are the others to read before you sign.
| Term | What it means | What to check |
|---|---|---|
| Amount | The money approved | How much reaches your account after any fees come off the top |
| Cost | A factor rate on an advance, an interest rate on a loan | The total you repay in dollars |
| Payment and frequency | The amount due each day, week or month | Whether a usual week or month of deposits covers it |
| Fees | Origination, closing or administration fees | Whether they are taken from the amount or added to the balance |
| Collateral | What secures the money | Which assets the lien covers |
| Personal guarantee | An owner's promise to cover the debt in the cases the contract lists | What triggers it and how much it covers |
| Prepayment | What paying early costs or saves | A penalty on a loan, or an early payoff discount on an advance |
Cost is where advances and loans differ most. An advance is priced with a factor rate, so an example $60,000 advance at 1.32 means $79,200 repaid and a $19,200 cost, however long the term. A loan charges interest on the balance as it falls, so the same loan over a longer term costs more interest. The Fed's study found lenders describing costs as factor rates, fee rates or simple interest, so the total repaid in dollars is the cleanest number to compare.
Collateral and personal guarantees are common across business debt. In the Federal Reserve Banks' 2026 Report on Employer Firms, 59% of firms with debt had secured it with a personal guarantee, 51% with business assets and 10% with portions of future sales. An advance is usually secured by the future sales the funder bought, typically with a lien on receivables and an owner guarantee that applies if the contract is broken. Equipment financing is secured by the equipment, and a bank or SBA-equivalent loan may ask for more.
Prepayment terms decide what an early payoff is worth. On a loan, paying early saves the interest you have not yet been charged unless a penalty applies. NerdWallet's guide to prepayment penalties says they typically run 1% to 5% of the remaining balance, and that SBA 7(a) loans with terms of 15 years or longer carry a penalty if you prepay 25% or more within the first three years. On an advance, the total is fixed, so an early payoff saves money only when the contract includes an early payoff discount. Ask for the discount schedule in writing before you sign.
How a longer term changes the payment and the total cost
On a loan, a longer term lowers each payment and raises the total interest. The table shows a $150,000 term loan at an example fixed rate of 9%, repaid monthly, with no fees included. These figures are examples to show the arithmetic, not quotes, and they are rounded to the dollar.
| Example term | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 2 years (24 payments) | $6,853 | $14,465 | $164,465 |
| 5 years (60 payments) | $3,114 | $36,825 | $186,825 |
| 7 years (84 payments) | $2,413 | $52,722 | $202,722 |
| 10 years (120 payments) | $1,900 | $78,016 | $228,016 |
Moving from 2 years to 10 cuts the payment by $4,953 a month and adds $63,551 of interest. If the business can carry the 5-year payment comfortably, the shorter term saves real money. If the 10-year payment is the only one that leaves room for payroll and rent in a slow month, the extra interest is the price of that room, and paying ahead later, on a loan with no prepayment penalty, wins some of it back.
On an advance, the factor rate fixes the total, so at the same rate the term changes the payment and leaves the cost where it is. Take the example $60,000 advance at 1.32, a $79,200 total. Over 39 weeks the payment is about $2,031 a week, and over 52 weeks it is about $1,523 a week, with $79,200 repaid either way. Funders may price a longer term with a different factor rate, so when two offers come back with different terms, compare the weekly payment and the total repaid side by side.
How to match the term to what the money buys
A good rule is to finish paying before the thing you bought stops earning. If the $150,000 in the loan example bought a machine that will be worn out in 5 years and the loan runs 10, about $91,536 is still owed when the machine is replaced, and the next machine has to be financed on top of it. Squeeze a 7-year asset into a 2-year term and the payment is $6,853 a month instead of $2,413, money the business has to find before the machine has paid for itself.
- Inventory, a supplier order or a single job that pays back within a few months fits a draw on a line of credit or a revenue-based advance with a short term.
- Costs that keep coming back unevenly, such as payroll due before invoices clear, fit a line of credit, where each draw is repaid and the room opens up again.
- Vehicles, kitchen equipment and machinery fit equipment financing over roughly the years they will be in service.
- Buildings, major renovations and buying a business fit loans measured in years, such as SBA-equivalent or bank loans and commercial equity loans.
- Several shorter balances can be paid off with one longer loan, which replaces them with a single monthly payment.
The payment also has to fit a usual month. Before choosing a term, take the payment on each offer and set it against your average monthly deposits after rent, payroll and existing debt payments. If the shortest term leaves nothing spare in a slow month, the next term up is usually the safer choice.
How we compare offers with different terms
One application goes to the funders we work with, and the offers come back side by side, each with its term, payment, total and other conditions. The application is a short form plus four months of business bank statements, uploaded or connected read-only, and getting matched does not need a hard credit pull. There is nothing to pay to apply or to see offers. Revenue-based financing is typically funded within one to two business days of choosing an offer, equipment offers usually arrive as quickly, and SBA-equivalent and bank loans take weeks.
The funders we work with generally look for about a year in business and about $20,000 a month in deposits. If you are not there yet, apply anyway. Some funders work with newer or smaller businesses, and we will tell you what is realistic.
When the offers are in, we go through the payment, the total and the early payoff terms on each one with you. Start your application or call (818) 351-0225 to talk it through.
Business loan terms questions
What is the average small business loan term?
There is no single average small business loan term, because it depends on the product: revenue-based financing usually runs several months to about 18 months, equipment financing commonly runs 2 to 7 years, and SBA 7(a) loans run up to 10 years, or up to 25 years when they finance real estate.
What are the terms of a business loan?
The terms of a business loan are the conditions in the agreement: the amount, how long it runs, the cost as an interest rate or factor rate, the payment and how often it is due, the fees, the collateral, any personal guarantee and the rules for paying early.
What is the longest term for a business loan?
SBA 7(a) loans can run up to 25 years when they finance real estate, SBA 504 loans offer 25-year terms for major fixed assets, and commercial property loans generally run up to about 25 years, sometimes with a balloon payment due at the end of a shorter term.
Is a longer business loan term better?
A longer term lowers each payment but raises the total interest, so an example $150,000 loan at 9% costs $36,825 in interest over 5 years and $78,016 over 10 years, which makes the longer term the better choice only when the shorter term's payment would not fit a slow month.
Can you pay off a business loan early?
Usually yes, but check the agreement first: a loan may carry a prepayment penalty, often 1% to 5% of the remaining balance, and on a merchant cash advance an early payoff saves money only if the contract includes an early payoff discount.
