When you're looking at business loans for the first time, you might be overwhelmed by all of the information you need to understand in order to feel confident in your decision. One of the most important components of any type of financing is the loan term. This is the length of time and frequency you're required to repay the loan. Small business loan terms vary significantly depending on the type of financing and structure. Loan Term Length by Loan Type Most types of business loans have their own set of typical business loan terms. Here are some of the most common types of financing you might be considering and how the repayment process works. Loan TypeAverage Repayment TermRepayment StructureSBA Loans40 months to 20 yearsFixed paymentsLine of credit1 to 2 yearsPayments vary based on withdrawalsInvoice financingVariesMonthly paymentsEquipment financing3 to 10 yearsFixed monthly paymentsCash advance3 to 18 monthsFixed daily percentage SBA Loans The business loan term of an SBA loan varies depending on which specific type of SBA financing you apply for. In general, you can expect the repayment period to last between 10 and 30 years, but you can dig a little deeper to find out which program you're most likely to apply for and how long the loan terms last. SBA 7(a) loans: SBA 7(a) loans used for equipment, working capital, or working inventory last 10 years. SBA 7(a) real estate loans have a 25-year repayment term. SBA microloans: You can also apply for an SBA microloan, which allows you to borrow up to $50,000 for your business. Repayment terms average 40 months (a little over three years), but can go as long as 72 months (six years). SBA 504 loans: This loan program is designed to finance major fixed assets for your business that scale growth and create jobs. The typical business loan term is either 10 years or 20 years. Line of Credit A business line of credit gives you access to a credit line rather than depositing a lump sum of funds into your business account. So instead of making fixed payments on a predetermined schedule, your repayment term is structured a little differently. Here's how it works. Your business line of credit will come with both a draw period and a repayment period. As you draw funds, interest will be charged if you don't pay off the balance by the end of the statement period (just like your personal credit card). The draw period typically lasts a year or two. During that time, you'll also have a period payment schedule, which may be charged either weekly or monthly to facilitate paying down your balance. Understand what those payments look like before you apply, to make sure your company's cash flow can support that extra expense. When the draw period for your line of credit expires, you may have the opportunity to renew your account so you can continue to access those funds when you need them. Invoice Financing Invoice financing does not act like a traditional term loan or a line of credit. Instead, it's a type of loan that gives you advance payment for your business's outstanding invoices. The idea is to smooth out cash flow issues while you wait for your customers to pay for your goods or services. With invoice financing, you use those outstanding invoices as collateral to get a cash advance for part of the invoices' value; for instance, you may receive anywhere from 50% to 80% of the total invoice value in a lump sum. Then you'll make monthly payments (with an interest fee tacked on) until the customer pays and you can pay off the remaining balance in full. Invoice financing doesn't have a set term since you can't control when your customers pay. You run the risk of accruing high monthly interest rates that can eat into your profit margins if payments are received later than you expected. Additionally, you're responsible for repaying the borrowed funds regardless of whether your customer pays or not. So you need to feel comfortable with your business model and the repayment terms of invoice financing. Equipment Financing Equipment financing acts like a business term loan, except that the funds are used to purchase specific assets like machinery, vehicles, medical equipment, office furniture, technology software, and more. You can sometimes include soft costs in the amount financed as well, like delivery fees for a large piece of equipment. Additionally, the equipment you purchased is used to secure the loan. Once the equipment is purchased and paid for by the lender, you'll make fixed payments each month, with interest added to the principal balance. The loan term varies by lender, but usually lasts between 3 and 10 years. Once you've repaid the loan in full, you'll own the equipment outright. And since the payments stay the same each month, it makes financial planning easier. Cash Advance A cash advance is money up front that you pay back with portions of your daily income until the balance is repaid. Instead of charging interest, the lender will charge a factor rate: a percentage of the total amount you borrowed. The factor rate on a cash advance usually ranges between 1.1 and 1.5 — so if you got a cash advance of $20,000 at a factor rate of 1.5, you would repay a total of $30,000. You’d repay a cash advance with money taken directly from your daily income by your lender, usually between 10% and 20% of it over a 3- to 18-month period until the balance is paid off. The final percentage agreed to by you and the lender is called the “holdback rate.” How to choose the best loan term for your business Before you get started on how to apply for a business loan, it's smart to think about the best financing and repayment structure for your business. Typical business loan terms vary greatly, so you'll want to consider how you plan to use the funds and what type of payment process your business can handle. Businesses that want a lump sum that is repaid with reliable monthly payments could consider SBA loans and equipment financing. But if you want access to capital for financial emergencies or time-sensitive growth opportunities, a business line of credit could be your best bet. Finally, companies that need help with smoothing out their accounts receivable process could consider invoice financing, while transaction-heavy businesses could try a cash advance. Lendio is a business lending marketplace that allows you to compare multiple financing offers side by side. It's a low-pressure way to explore different business loan terms in one place. Compare options for a small business loan today.