If your business needs a large cash injection to reach the next level, a long term business loan might be right for you. A long term loan offers a consistent source of financial support over an extended period of time. This can position your business to get ahead and take advantage of new opportunities right now, while also enabling you to key an eye on the future.

What is a long term business loan?

With long term business finance, businesses borrow a set amount of money upfront and pay it back, with interest, at regular intervals. Payment terms can range from at least 12 months to up to 30 years. With longer payment terms as an option, businesses can often apply for larger loan amounts.

Short term business loans operate just like long term loans, but with shorter repayment schedules.

Long term loans are likely to be secured loans, due to the fact that the amount loaned is usually larger and timeframe for repayment longer. There may also be unsecured loan options available through alternative lenders.

How much can I borrow for a long term business loan?

The answer to this question depends on a number of variables including your business, industry, how you plan to use the funds, your collateral and financial history. Typically, business owners are able to borrow anywhere from $250,000 to $50,000,000 and pay it back in monthly, quarterly, half yearly or annual repayment cycles. Loans for larger amounts will have stricter lending criteria. (If that’s more funding than you need, try our loan calculator to review your options.)

The long term cash loan carries a fixed or variable interest rate and a set maturity date. A fixed interest rate won’t fluctuate during the period of the loan and will enable businesses to have greater certainty over their payments. A variable interest rate is based on an underlying benchmark interest rate and may fluctuate over time. Repayments might be lower or higher, as a result but you may be able to make additional repayments to get ahead more quickly.

Traditional lenders, such as a local bank or credit typically offer the best rates and repayment terms on long-term loan. Many online lenders, however, also now offer competitive long term loans. Their loan requirements will likely be less demanding and the application can be processed more quickly. The downside is their rates tend to be slightly higher than those of traditional lenders.

6 reasons why businesses may choose a long term loan

There are many reasons why a business would choose to apply for a long term loan, depending on their financial position, growth plans and the market opportunity.

Here are a few common scenarios in which a long term business loan might be useful:

  1. To purchase fixed assets such as equipment for production process
  2. To make a large inventory purchase to take advantage of bulk savings
  3. To purchase an existing business
  4. To purchase real estate for or additional space for your business
  5. To fund the expansion of your business
  6. To invest in your future growth

How does a long term business loan work?

  • Prepare your financial information
    Lenders will want to see detailed information about your business’ financial history, including a business plan, income, expenses and projected cash flow statements. (More on this below)
  • Decide your preferred loan terms
    Decide in advance the loan amount required, your preferred rates, time period and whether you want the sum upfront or in installments. Then, check with your lender to ensure they can accommodate.
  • Do your research
    Research your options to compare fees and interest rates of different providers or consider speaking with a business advisor or your accountant.
  • Application assessed
    Once you’ve applied, your application will be assessed according to the lender’s system.
  • Receive your funds
    Start putting the capital toward your business growth!

Paperwork checklist for a long term business loan

Make sure you understand what information is required of you to apply. Preparing the necessary paperwork in advance of applying will help streamline the application process.

A business profile detailing the type of business you operate, annual sales, employee numbers, a profit and loss statement, length of time the company has been in business
Your business plan
Personal and business financial statements
Information about the collateral being provided (if the loan is secured)

5 expert tips to know before you apply for a long term business loan

  1. Pay close attention to your interest rate
    The interest rate determines your repayments, so use a repayment calculator to make sure you can afford it.
  2. Consider if you can make additional payments
    Some loans with variable rates allow you to make additional payments, which can help you pay off the loan more quickly.
  3. Ask about other charges and fees
    Extra charges can add up quickly if you’re not careful, so be sure to ask about other fees.
  4. Put your best foot forward
    Make sure your business loan proposal is well-researched and presented.
  5. Consider your risk level
    Applications are assessed on case-by-case basis but your chances improve if you demonstrate experience and are operating in a lower-risk industry.

Still not sure if a business line of credit is right for you? Compare other types of loans to learn more.

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