A long-term business loan could be the funding solution you need to move your business forward. With the help of these loans, you can make investments in your business for the long haul.
Let’s take a closer look at your long-term business loan options.
What is a long-term business loan?
First things first, it’s important to understand exactly what constitutes a long-term business loan. Like other business loans, these loans provide sum of capital upfront, which is paid back on a regular basis. The loan terms could range anywhere from 2 to 20 years, or more! Generally, long-term business loans are used to invest in the future growth of the business.
For example, you might need help buying a property or purchasing equipment that could allow your business to expand. Instead of putting your expansion dreams on hold, you can take advantage of a long-term business loan to kickstart these goals.
Typically, these loans are for an amount of $25,000 or more. In most cases, your business will need to have a history of success in order to qualify for a long-term business loan. Since these loans are to be paid back over multiple years, lenders want to know that you’ll be able to repay the loan. As a result, the loan application process can be very paperwork intensive. You should be prepared to share detailed financial records of your business in order to secure this kind of loan.
Long-term business loans vs short-term business loans
As you consider your business loan options, you’ll need to make a decision on whether you want a long-term or short-term business loan. With a short-term loan, you will also receive a sum of cash up front. But you’ll be required to repay the loan on a shorter time frame. Typically, you’ll find short terms that range from three months to eighteen months and are usually repaid daily or weekly, whereas long-term loans normally have monthly payments.
In addition to a shorter repayment timeline, some short-term loans have on average a smaller loan amount than long-term loans.
If you are dealing with a short-term cashflow problem, then a short-term loan could be a good solution. The quick cash can help your business stay afloat during tough times. With a faster application process, you can tackle a problem quickly. But if you need capital to fund a long-term expansion, then a long-term loan will be a better fit.
Types of long-term business loans
There are many types of long-term business loans available. The right loan for your business will depend on your unique situation. Here are a few options.
Long-term line of credit: A line of credit can be a great tool for any business. Instead of borrowing a set amount of funds upfront and locking yourself into a fixed payment schedule, you can secure a line of credit to only draw funds when you need them.
Depending on your business, you may be able to secure a line of credit for up to 10 years. In some ways, a line of credit is similar to a business credit card. The funds will be available for you to borrow when you need them.
Long-term business loan: Although it is possible to secure a long-term business loan from a traditional lender, it can be more difficult. If you are considering this option, your business will need to have a lengthy and successful track record. Plus, you’ll need great financial records and a good business credit score.
Long-term Small Business Administration (SBA) loans: The Small Business Administration offers loans with terms for up to 25 years. The 7(a) and CDC/504 loans are available for businesses that want to fund expansion plans. There are specific ways that you are allowed to spend these funds including renovating a property, buying a new property, or buying equipment. The goal is to help businesses expand with the help of affordable financing.
With these loans, you can secure a loan term of up to 25 years. As for the loan amount, you may be able to qualify for a loan between $5,000 and $5 million. The loan term and amount will depend on your business, but you should expect to enjoy a relatively low interest rate after a lengthy application process.
How to secure a long-term business loan
First, take some time to consider your long term business loan options. The type of loan you pursue will depend on the loan’s goal. If you want to buy equipment, then an SBA loan could be a good option. If you want to have access to cash when you need it, then a line of credit could be a better fit.
Once you’ve determined the type of loan you want to pursue, then shop around for a lender. Comparison shopping will help you find the best financing deal available to your situation. Finally, fill out the application and be patient. It can take many months and a stack of paperwork to secure a long term business loan, but it can be worth it to further your business plans.
The bottom line
Long-term business loan options are out there. As you look for ways to grow your business, consider long-term loans as an opportunity. Consider your options and then move forward with confidence.