Applying for a long term loan is an important step for most budding entrepreneurs who need capital to finance their new business. However, applying does not mean that you will get the loan easily.
Obtaining long term loans is much more difficult than getting a short term loan for your business. You will have to present a lot of paperwork to win the confidence of the lenders and ensure that you are capable of paying back the loan in a decided period.
The benefits of a long term loan for business are endless because it provides financial freedom to companies and provides them with sufficient capital to expand and manage financial risks.
Let’s discuss some of the fundamentals of long term loans before looking at the top 5 lending options you have for this type of loan.
Definition of a Long Term Loan
A long term loan is one that the borrower has to pay back over a long period of time. The minimum repayment period of such loans is typically three years, but the repayment schedule is much more flexible than short term loans.
These loans help people in their personal and professional lives. Many people often do not have enough cash to establish a new business or make other expensive purchases like vehicles or property. However, to qualify for a long term loan, a borrower must have a positive credit history, along with the capability to provide collateral.
5 Benefits of Long Term Loans
Following are the top 5 benefits of a long term loan for businesses:
1. Flexible Cash Flow
Long term loans provide the much-needed flexibility to the business owners to have the capital to invest in different assets and projects. As a result, you do not have to spend much time saving for investment and instead take the benefit of an investment opportunity immediately.
2. Minimum Interference
Whenever there are private investors involved in your company, you will have to relinquish control of the company to some extent. On the other hand, a long term loan will make sure you have the financial freedom to make smart investment decisions independently and have absolute control of your business.
3. Long Term Support
Having a long term relationship with a well-established lending institution can give a significant boost to your business. With the right investor throughout the period of financing, businesses have the potential to benefit from these partnerships in many different ways.
However, if you choose to obtain a short term loan for your business, there is a high chance that you will have to find new financing partners.
4. Credit Building
Most of the long term loan programs follow a well-organized payment process to meet the borrower’s requirements. It allows you to make regular payments according to a structured schedule. As a result, you can build a positive credit history which is also important to help you in future debt financing.
5. Diverse Portfolio
Long term loans are extremely useful in providing flexibility and financial resources to help you invest in different assets and fulfill your capital needs. It significantly reduces your dependency on a single capital source and has a diverse capital portfolio.
Top 5 Best Lending Options
There is a myriad of financial institutions and lenders who provide long term loans to different types of businesses. Some of these best lending options are:
Bank of America can provide you a reliable long term loan if you are running a profitable business. It has a lot of different loan programs to facilitate various consumers. However, you should only choose this option if you do not have a relationship with a local bank.
The interest rates of Fundation are significantly higher than several other lenders, but you will be getting flexible loan requirements from it. It is a popular lender for long term loans, especially for medium and large businesses that have an average credit score.
Credibility Capital provides quick and affordable long term loans for small businesses. The terms of its loan programs are typically shorter than the majority of the other lenders, but the qualifying criteria are also more flexible than others.
Funding Circle has a smooth and streamlined process of approving loan applications and providing funding for a long period. Most of the entrepreneurs are able to get the loan within five days. Moreover, you can easily complete the application online.
To obtain a long term loan from Funding Circle, you must have a personal credit score of 620 or higher, and your business must be at least two years old. It simply means that you cannot obtain this loan for a new business.
Taking out a long term loan for your business can be highly beneficial for the overall growth and success of your business. You can use such loans to fulfill a variety of business needs like renovation, buying equipment, and other kinds of investment.
One thing that you must keep in mind while dealing with long term loans is that qualifying for them can be challenging, especially for companies with bad credit. Therefore, you should carefully explore your options to choose a suitable lender.