According to the Small Business Administration, only about half of all new businesses survive past the five-year mark; roughly one third are still open after 10 years. For the small business owner striving to be among the surviving businesses, seeking a loan for renovations or expansion ensures the company can meet growing demand without tying up cash flow. Fortunately, there are several types of loans available for small businesses, depending on the need the loan will fulfill. For most businesses seeking to finance long-term growth, a term loan is the best option. When to Use a Term Loan Term loans are ideal for hiring new employees; remodeling a space; opening an additional location or investing in equipment that will expand production. However, term loans are not ideal for short-term needs, such as covering a seasonal cash flow drop. Term loans have lower interest rates than shorter-term loan options. One example is a merchant cash advance (MCA), which charges 5 to 20 percent and recoups payment out of a percentage of a business’ daily credit card sales. However, when the MCA factor rate is calculated in, the APR can add up to more than 50 percent. Another short-term option is invoice factoring, where a company “sells” its outstanding invoices to a third party that pays out the invoice in advance, minus a fee. The fees for invoice factoring are dependent on the discount rate, which calculates to an effective APR of 28 to 60 percent. In comparison, term loans typically have interest rates and APR’s ranging from 5 to more than 35 percent, based on the amount borrowed, the loan duration and the borrower’s credit score. Financing Big Changes for Small Businesses Term loans are the most typical loan granted to small businesses. In 2014, the SBA reported that term loans accounted for 19 percent of financing used by small businesses. These loans are typically made for a number of years, with fixed interest rates and a regular repayment schedule. Payments are always the same and paid out on either a bi-weekly or monthly basis, making it easy for the business to budget accordingly. Getting A Term Loan in Today’s Market Since the 2008 recession, traditional banks have funded fewer small business loans. Many lenders have ceased awarding loans for less than $1 million, as the cost for processing a smaller loan is the same with less of a return. Even the SBA has followed suit – in 2016, only 22 percent of approved loans were for $300,000 or less. For many businesses, the change in the lending industry has made it difficult to get a smaller loan that would nevertheless inject the company with the cash it needs to grow to the next level. In response to the changing market, many new lenders have surfaced. Online lenders have been able to fill the gap left by traditional banks for smaller loans. These lenders have streamlined the loan approval process to better cater to small businesses seeking loans for amounts below $1 million. These lenders have been able to save money by creating an online loan application process that allows the borrower to upload their financial documents in an instant. Borrowers can also give instantaneous, secure access to their bank statements. By investing in these timesaving applications, online lenders are able to approve loans more quickly and cost-effectively. In many cases, loan applications are reviewed and approved within 48 hours. In turn, the lender can deliver funds to their customers in as little as three days – much faster than traditional banks. How to Get a Term Loan For a small business to qualify for a loan with an online lender, you will typically needs to be able to produce two years of financial records; most lenders also require that your business make more than a certain amount in revenue per year. Many online lenders offer competitive rates and low fees, with a much faster application turnaround than traditional banks or other financing options. However, should you should be careful to read the fine print when applying for a loan. Lenders may charge a number of additional fees that can make the loan much more expensive than anticipated. These fees can include origination fees, processing fees, utilization fees, documentation fees, late fees and fees for paying off the loan early. Additional fees can increase the loan’s APR significantly. Having a deep understanding of financing options can make it possible for your business to safely grow and expand, ensuring it is still open for business long after its 5 or 10 year anniversary has passed.