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What is a Long-Term Business Loan?
A long-term loan is a business financing option for established businesses that need a large amount of capital at a lower interest rate for growth. These long-term loans typically have repayment terms of at least three to ten years, which can be especially appealing to business owners looking to make an investment in their business that will provide a return on investment over a long period of time.
For online long-term business loans, the approval process is convenient and simple, and we connect you with the right-sized capital to meet your business goals.
How Can a Long-Term Loan Promote Business Expansion?
Long-term business loans allow borrowers to pursue large-scale growth plans while paying for the initiative over the course of the loan. Whether you are looking to tackle the next phase of your business plan, open a new location, purchase new equipment, expand into new markets, grow your team, or launch a new product, long-term loans can help you reach your next phase of growth.
Longer term loans are best for planned business expansion and growth goals. Similar to buying a house or getting a college education, many business initiatives take time to gain a return on investment. The lower monthly repayment amounts of long-term loans can give your business the margin it needs to maintain positive cash flow.
How Do Long Term Business Loans Work?
Long-term business loans allow you to meet your most important business goals with favorable repayment terms. Whether you want to open a new location, grow your team or launch a new product, these expansion loans can help make your most important business goals happen.
When you apply for a long-term business loan, you will receive the full loan amount upfront as a lump sum. You can use that capital to fund your business growth initiative and set your business up for long-term success. That long-term loan is then repaid over a relatively long time (compared to other business loan options) in smaller monthly payments.
Because long-term business loans are repaid over a long time, the interest rates are lower. However, you will need to carve out your monthly payment every month for at least a few years. For that reason, it is best to run the numbers to ensure that your business investment will truly take your business to the next level. Short-term loans, like working capital loans, are better for more immediate needs or to cover seasonal fluctuations in business.
How to Get a Long-Term Loan Online
Long-Term Business Loan Details
Long-Term Business Loan: Advantages and Disadvantages
Due to favorable interest rates and long repayment terms, long-term loans are a great option for financing expansion projects. However, short term funding may be a better option for cash flow stabilization and growth initiatives with a shorter project timeline.
FAQs About Long-Term Loans
Where can I get a long-term loan?
Long-term business loans are available through a number of lenders. Traditional banks, credit unions and online alternative lenders are among the most popular. While your business bank or credit union likely offers business loans, bank loans are notorious for having very high qualifying standards and taking a long time to actually provide funding. Applying for an online business loan offers both time and eligibility advantages, providing loans to business owners who want to move quickly on an opportunity or don’t meet bank eligibility standards.
Many financial institutions refer to long-term and short term loans as simply “terms loans.” Long-term loans are any term loan that has a relatively long repayment term, usually three or more years.
How can I use a long-term business loan?
Many long-term business loans are flexible, which means that you can use them to fund your most valuable business opportunities (and you make that determination as the business owner). However, you may find that your business loan comes with strings attached in some situations. For example, some long-term loans like commercial mortgages or truck financing must be used to fund a specific purpose, such as real estate. Be sure that you understand any loan terms before signing the loan agreement.
Is a long-term loan or short term loan better for my business?
Whether a long-term loan or short term loan is right for your business depends more on your specific business need than on your business industry or size.
Short term business loans typically have lower qualifying standards and shorter repayment periods, so they are great for short term needs like seasonal fluctuation in revenue or a sudden need for an infusion of capital. Shorter-term loans may have higher interest rates, but less time for interest to accrue.
Long-term business loans have stricter borrowing requirements, lower interest rates and longer term lengths, so they are great for long-lasting initiatives and growth plans. While long-term loans usually have comparatively low rates, lenders may have fees that guarantee you pay enough interest, such as prepayment penalties.
Both types of loans have unique advantages, so it is important to find the right-sized funding for your business. Talk to a Credibly business consultant today to find the best funding option for your business needs.
Do I qualify for a long-term business loan?
When you apply for a long-term business loan, a lender will look at a variety of factors to determine your “creditworthiness,” which is basically a measure of how likely it is that you will pay back the loan. During the application process for a small business loan, business lenders will ask for your credit history, such as your personal credit score, and your business financial documents, such as your tax returns, to establish whether you will be able to add a loan payment without breaking the bank.
If you meet certain requirements for qualified borrowers, such as the minimum credit score and adequate cash flow, a lender will typically make you a loan offer. Depending on how qualified you are, your interest rate may vary. Be sure to read the full loan offer before accepting to ensure you are happy with the terms and can repay the loan.
Why is expansion important for a business?
Business expansion helps expose your products or services to a broader audience in new markets, which increases your customer base, revenue, and profits. Ultimately, if you want your business to grow, you will need to expand to find or accommodate new customers who want your product or service.
Let’s say you have one auto repair shop. You may be knocking it out of the park every month and have service appointments booked weeks in advance, but the amount of revenue you can draw from that single location has a ceiling. To keep growing, you will physically need more space, more staff and more resources. But to get a bigger space, more staff and more equipment, you need cash upfront to get started. A long-term loan is ideal to help you make this leap.
What are other ways to get money to expand a business?
Because business expansion is a large-scale project that requires significant investment, long-term financing and equity financing are typically the best financing options. SBA loan programs, crowdfunding, and angel investors can be an alternative to expansion loans, depending on your unique needs.
There are other business funding options that you could use to expand your business, such as applying for a business line of credit or putting a bunch of expenses on your business credit card. However, these options are likely to cost you big time in accrued interest in the long run. If you want to expand responsibly and sustainably, finding a long-term loan is preferable.