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What are long term business loans?
When planning to scale a business, speed, agility and capital are pivotal to your expansion – there may not always be time to wait for funds. In such cases, a business loan can help you bring your plans to fruition. You can also use this capital to tackle a financial crisis in your business, such as regulating cash flow for employee payments.
A long term business loan enables you to spread the cost of your business expenses into affordable monthly repayments over a longer repayment term. The longer your repayment term, the lower will be your monthly instalments. However, to avail of a long term business loan, you will need a substantial credit history to support your application.
With LoanTube, you can borrow unsecured long term business loans of up to £1,000 to £35,000, over 3-7 years, without pledging your business assets. Take on new business challenges head on – compare affordable business loans with guaranteed APRs at the click of a button!
How does a long term business loan work?
Long term loans provide you with the required funds to help you elevate your business to a new level. Before applying for a long term business loan, you have to determine what type of business loan will work best for you – secured or unsecured long term business loans. Most lenders typically assess your credit score, financial circumstances, and the current standing of your business to evaluate their risk proposition. Your credit score and business standing hold a slightly higher weightage than the other factors regarding unsecured loans.
A secured business loan, on the other hand, allows you to borrow money by pledging assets (office space, land, machinery, business equipment, etc. ), which would reduce the lender’s risk. Therefore, secured business loan lenders may not weigh your credit score as heavily as in the case of unsecured business loans.
Once you qualify for a long term business loan, the lender would typically disburse the loan amount into your bank account directly. You can use the funds at your discretion but should repay them within the agreed-upon duration. If you miss repayments on your unsecured loan, it could severely dent your credit score, and you may even get a County Court Judgment if you default on the loan. Defaulting on a secured loan could cost you your business assets since the lender may repossess them to recuperate their loss. Thus, adhering to your repayment cycle and the term is paramount to reap the benefits of your long term business loan truly.
Another salient factor that you need to consider is the length of the loan term. While an extended period can significantly lower your monthly repayments, you will also accrue interest for a longer duration. So you may end up paying more towards goods. It is, therefore, essential to weigh the pros and cons before opting for a long term business loan.
How long is a business loan term?
Depending on your business requirements, you can typically borrow a long-term business loan for 3-7 years. Suppose you apply with a stellar credit profile, reasonable business history and stable cash flow. In that case, some lenders may even lend you a sizeable loan amount for up to 10 years.
How can I use a long term business loan?
You can use a long term business loan to solve a variety of purposes:
Whatever be the purpose of your loan, it is vital to understand the repayment implications associated with it. It would be in your best interest to abide by your repayment schedule and settle your loan within the term.
Are long term loans better for my business?
The right type of loan depends more on your company’s business needs than its nature or size. The qualifying standards for short-term business loans are usually lower, typically having shorter repayment terms. Therefore, they are perfect for short-term needs such as chance variations in revenue or an urgent and unplanned need for a capital influx. Since there is less time for interest to accumulate on short-term loans, their interest rates may be higher. Still, you may incur a lower overall loan cost.
Compared to shorter-term loans, long-term loans have lower interest rates and shorter terms, so they’re perfect for developing long-term plans. Long-term loans generally have low-interest rates, but lenders can charge prepayment penalties to ensure you pay enough interest.
Consider your business’s pros and cons carefully before committing to any funding.
Will I need my business credit report to get a long term business loan?
Credit reference agencies compute your business credit score using your business credit report. Borrowing history, credit applications, current debt, payment history, and the number of years the company has been in business are all considered.
You will find several credit reference agencies (CRAs), and each will calculate a credit score differently. Lenders consider your business credit report along with an affordability and risk assessment to weigh your application.
Don’t apply for too many long term business loans in a short time frame. Remember, applying for a long-term loan will involve a full credit check and will have a negligible impact on your credit score (only for a brief period).
To keep your business credit score healthy, you should do the following:
What to consider before borrowing a long term loan?
Long term business loans could be your business’ launch-pad to success. Still, it is critical to evaluate the pros and cons before taking your call. Consider the following to make an informed financial decision:
Is this an appropriate loan amount for me? Before applying for the loan, it is crucial to determine whether you will repay it. Don’t borrow more than you can afford to repay within the period you agreed.
Long term loans require more outstanding commitment. The monthly payments of a long-term loan can be lower, but the overall interest may be higher. Evaluate your financial circumstances carefully to figure out a convenient loan term.
Your credit score can suffer if you fail to make a payment. You could suffer a default if you miss several payments, leading to a County Court Judgment (CCJ) that could negatively affect your credit score. Thus, it is crucial to keep up with your repayments to maintain your credit promptly.
A contingency plan will help you stay on track with your repayments more efficiently in an emergency. A contingency plan could be beneficial in the case of secured business loans, where your collateral is on the line.
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Indicative Loan Details
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Total repayment
Monthly repayment
RAPR
Interest
*The rate you get will depend on your individual, financial circumstances. Late repayment can cause you serious money problems. For more information, go to moneyhelper.org.uk.
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Pros:
Cons:
Short term business loan
A short term unsecured business loan can help you infuse cash for some urgent expenses. The term typically lasts from 0-1 year.
Invoice factoring
Invoice factoring involves the sale of unpaid invoices to a lender for a percentage of their value, which the lender pays typically upfront. You can use the option to improve cash flow every month or for a one-time payment. Your business can factor its invoices in whole or in part.
Ideal for: Businesses that rely on accounts receivable.
Invoice financing
You can also get an advance on your invoices with invoice financing. Essentially, it’s a loan backed by your company’s invoices. As an upfront payment, you’ll receive a percentage of your invoice’s value, which you’ll have to repay with interest and fees. You repay the lender once the creditors have paid you.
Line of credit
Lines of credit give your business ongoing access to a defined amount of funds as and when you need a cash influx. As long as you don’t reach the credit limit, you can withdraw money whenever you need it. You only have to pay interest on the amount you borrow, just like a business credit card. Lines of credit usually require minimum payments and come with an annual fee. Still, you can typically keep the line of credit open for however long you like.
LoanTube does not charge an upfront fee for your loan. Enjoy a transparent and hassle-free borrowing experience at zero upfront fee.
Here’s what you need to qualify for a business loan
Long term business loans may be more expensive overall than short term business loans because they accrue interest over a more extended period. So, while you may opt for a loan with low-interest rates, you may still end up incurring a higher cost because you’ll have to pay interest for a longer duration.
You can borrow up to £35,000 over 3-7 years with LoanTube.
LoanTube helps UK firms access business finance through multiple direct lenders. We are an introducer and do not provide loans ourselves.
Think carefully before securing debts against your home or your assets. Your home and assets may be repossessed if you fail to keep up with repayments on debts secured against it.
All loan approvals & quotes are subject to credit checks and affordability requirements by lenders. If your business meet the lender’s criterion, you can borrow the money. We as a broker make an attempt to process your application with the most suitable lenders in our panel.
LoanTube is a credit broker and not a lender.
Warning: Late repayment can cause you serious money problems. For more information, go to moneyhelper.org.uk
LoanTube Business Model: As part of our business operations, we connect customers with partner lenders to help them find suitable loan options. LoanTube receives a commission from lenders for this service, which may, in some cases, affect the cost of the loan to the customer. However, as a responsible broker, we are committed to identifying the best possible loan options for our customers.
The rate you are offered will depend on your individual circumstances.
Representative APR Example: Amount of credit: £50,000 for 24 months at £2,339.38 per month. Total amount repayable of £57,348.69 Interest: £7,348.69 Interest rate: 14.4% pa (fixed).
14.4% APR Representative. Loan term lengths between 3 and 60 months.
