The Average Length of a Small Business Loan

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Small businesses require loans for a number of reasons, including as start-up capital, to fund working capital, to fund expansion and to strengthen their balance sheets. Because of the huge variety of loan types and reasons for obtaining a loan, there is not a lot of information available regarding average loan maturities. For example, both small and large businesses obtain long-term mortgage loans on commercial and industrial properties. In this case, the size of the business would have little if any effect on the maturity of the loan. Small businesses owners are also more likely to use their personal credit cards to fund business growth.

Average Loan Maturity

The Federal Reserve Bank conducts periodic surveys of its member banks to obtain information regarding their loan portfolios. Information is collected from both large and small banks, and of various loan sizes. Under the premise that small business loans are likely the smallest sized loans made by the smaller domestic banks surveyed, the weighted average maturities of loans with balances between $10,000 and $99,000 was 294 days. For loans with balances between $100,000 and $999,000, the weighted average maturities equaled 353 days. This data come from the Fed's Survey of Terms of Business Lending, which was released publicly on March 31, 2015. As a general rule, the loan type has the greatest impact on the maturity of the loan. For small businesses, the standard term on loans secured by vehicles or equipment is five to seven years. The standard term is five years for loans secured by liquid assets. Commercial real estate mortgages usually range from five to 20 years.

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