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A long term business loan is a type of finance that provides your business with a sum of money which you repay over a longer period of time, usually several years.
As the repayment period is longer than short term loans, the repayments are spread out. This means that your monthly repayments (including both principal and interest) will be lower, making it more manageable and reducing the impact on your cash flow. However, as your business may be paying back the loan for longer the total interest payable could be higher even if the annual interest rate is lower.
Typically longer term business loans - over 24 months for example - are available only to businesses with a longer financial history or high levels of security in assets or property for example.
Whether you're aiming to expand your team, upgrade essential equipment, or manage day-to-day expenses, a long term business loan can help you achieve your goals. At Capitalise, we connect you with over 100 UK business lenders so that you can find the right fit funding for your business.
Long term business loans allow businesses to borrow capital over several years, making repayments manageable and aligned with projected revenue growth. Here’s an example of how the process works:
A long term business loan helps you manage your cash flow by spreading out payments over several years, making them smaller and easier to handle each month. It's an affordable way to get the money you need for big projects or investments, with options that fit your business's needs. You can use it for many purposes, like hiring more staff, upgrading equipment, or buying property.
Long term business loans are perfect for businesses looking to make substantial investments and need manageable repayment schedules. They are particularly beneficial for:
You can use a long term loan for a variety of business purposes, such as:
To get a long-term loan for your UK business, you’ll need a good business credit score. This is important because the lender will want to know your business will repay over a long period of time. Typically the longer and stronger the financial history of the business the longer the term of the loan.
A steady revenue is also important as it proves your business can generate enough income to meet financial obligations. Some lenders will also look for demonstration of positive cash flow over the past 6-12 months as it demonstrates your ability to cover daily expenses and loan repayments.
There are different types of long term loans that can cater to different needs. Here’s an overview of some of the different types:
Asset finance allows you to borrow money specifically to purchase business assets such as machinery, vehicles, or technology. With asset finance, usually the asset itself is used as collateral for the loan so it can be easier to obtain than other unsecured loans.
Commercial mortgages are long term loans used to purchase or refinance commercial property, such as offices, warehouses, or retail spaces. These loans typically have fixed interest rates and longer repayment terms, up to 25 years.
Unsecured business loans do not require any collateral, making them a more straightforward option if you don’t have significant assets to offer as security. They typically have higher interest rates than secured loans, but can provide quick access to funds.
Secured business loans require collateral, such as property, equipment, or other valuable business assets. Because the lender has a form of security, these loans usually come with lower interest rates and higher borrowing limits compared to unsecured loans.
The term length for a business loan can vary depending on the type of loan, the lender, and your borrowing needs. If you were looking for a long term commercial property loan, you could look at terms as high as 25 years. Whereas an unsecured long term loan may be over 5 years.
How much you can afford to borrow with a long term business loan will depend on a variety of factors, including your business credit score, how much revenue you generate and the value of your assets you could use as security.
Typically a business can afford more as a long term business loan compared with a short term business loan as the repayments. This is because the repayments are lower each month as the principal is repaid over a longer time.
To be eligible for a long term business loan good financial history and business credit score will be needed, or strong levels of security such as a debenture or security of assets.
When you sign up to Capitalise, you’ll be able to check your funding eligibility for free. We’ll use data to give you an estimate of how much you may be eligible to borrow.
If you’d just like an estimate of how much you could afford, you can use our Business Loan Calculator. This will show you how much your monthly repayments could be and the total cost of a loan, so you get an idea of what you could afford to repay.
Deciding between a long term and short term business loan depends on your needs and financial situation. You should consider your cash flow, repayment capacity, and the purpose of the loan to decide which option suits your business best.
Generally, you should choose a long term loan if you need a larger amount of money for significant investments, can provide collateral, and prefer lower monthly payments over a longer period.
You should consider a short term loan if you need quick access to funds for immediate needs, prefer a shorter repayment period, and want flexibility on when you repay the loan.
Yes, many lenders do require a personal guarantee for long term business loans. A personal guarantee acts as a promise that the business owner is personally responsible for repaying the loan if the business cannot. However there are some lenders that offer no personal guarantee loans. If you’d prefer not to offer a personal guarantee, just start a search for funding to see what your options could be.
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