Long Term Business Loan

A long-term loan is a kind of credit borrowing that is repayable over a protracted period of time with additional interest and fees. Comparing long-term loans to short-term business loans, long-term loans are more advantageous and are generally favoured by borrowers.

Now that you know the long term business loans definition, Consider applying for a long-term business loan if you want to make a sizable investment in your company. These loans have set repayment schedules and low-interest rates, making them a reliable source of capital for businesses of all sizes.

However, it's crucial to comprehend the various long-term financing options as well as their advantages and disadvantages. The information in this post will help you locate and apply for a long-term business loan.

Long-term loans are typically appropriate for customers who need greater loan amounts. Business firms find it simple to repay the loan amount with manageable EMIs thanks to this form of a loan. The maximum repayment period is five years, however, it may be longer in rare circumstances depending on the lender's sole discretion and company needs. Established businesses with a solid financial history are more likely to be approved for long-term business loans.

What are long term business loans?

An extended period of time is specified for the repayment of a long-term business loan. Although some loans have periods as long as 25, the typical repayment period is between 5 and 7 years.

Long-term loans are often used to finance a significant investment in the business, such as the purchase of the real estate, machinery, or personnel. You will receive the money for such a purchase when you take out a long-term business loan in a lump sum, which you will then repay over time.

Benefits of Long term business loans

Here are some of the advantages of long term loans for business:

• Flexible repayment options:

  Long-term business loans provide flexible payback terms that can continue for a number of years. This enables firms to invest money with ease in benefits for the future without worrying about paying back loans quickly.

• Minimal paperwork:

  Long-term business credit lenders have shifted their business practices online as digitalization sweeps the globe. With only a few clicks and by conveniently uploading their paperwork online, borrowers may now simply apply for loans. Additionally, because all information is centralized on a specific website, it is now simpler for borrowers to keep track of the amount of their due repayments.

• No collateral:

  Long-term company financing solutions don't require collateral in order to qualify for a loan. This is a particular relief for business owners who must use all of their assets to make their company profitable and who cannot afford to put any asset up as security.

Long Term Business Loan Interest Rates and charges

In comparison to other types of company loans, financial institutions' long-term loan interest rates are relatively cheaper. The lender will have the full authority to determine whether the interest rate is fixed or floating. Depending on the applicant's profile, the fees and charges will differ from bank to bank.

Here are the important factors related to business loan interest rates and charges:

• Long term Business Loan Interest Rates Ranges from 12.75% to 44% per annum.
• Loan Processing Charges Vary from 2% to 6% plus GST.Additional convenience fees up to ₹500.
• Cheque/ACH Return Charges ₹500 plus GST per instance.
• Cheque/ACH Swapping Charges Duplicate No-Dues Certificate ₹500 plus GST per instance.
• Duplicate Statement/Amortization/Repayment Schedule/Agreement/Sanction Letter ₹200 plus GST per instance.
• Penal Interest Fixed at 24% per annum.
• Prepayment/Foreclosure (07-24 Months of EMI Repayment)5% plus GST.
• Prepayment/Foreclosure (More Than 24 Months of EMI Repayment)4% plus GST.
• Loan Cancellation Interest charged for the interim period between the date of disbursement and the date of loan cancellation.
• Any Other Charges (Case to Case Basis)At actuals.

Difference between long-term and short-term business loans

Your company could occasionally require a sudden cash injection to cover payroll or handle your working capital requirements. It could be wise to seek a short-term business loan in this situation.

The primary distinction between long-term and short-term business loans is that the former is intended for long-term investments, while the latter is not. In contrast, short-term loans can assist you in addressing your current monetary necessities.

Smaller amounts and shorter repayment terms are typically available for short-term business loans. Additionally, the interest rates on these loans are often greater than those on long-term business loans.

But compared to long-term loans, the application and approval process is simpler. Additionally, being approved for a short-term business loan could be simpler for new businesses and consumers with bad credit scores. Only established businesses with stellar balance sheets tend to qualify for long-term business loans.

Types of long-term business loans

Here are the types of business loans that may be available to you depending on the lender:

• Bank loan:

  Bank loans are an affordable option for enterprises to get capital because they have long payback terms and low-interest rates. However, well-established companies with great credit histories are the best candidates for these loans. When you apply, you should prepare a tonne of supporting papers, and the approval procedure will take longer than with other loans.

• Equipment loan:

  Equipment finance is a type of commercial lending used to buy machinery or equipment associated with a business. These loans may be an excellent choice for businesses that need heavy machineries, such as restaurants, manufacturing plants, and construction companies. You may buy the pricey equipment you need with the help of business financing by dividing the cost into affordable monthly payments. Additionally, since the equipment is used as collateral for the loan, it might be simpler to be approved for equipment financing.

• Commercial real estate loan:

  A loan for commercial real estate is used to buy real estate for your company, such as an office, warehouse, or retail facility. Banks, credit unions, and online lenders all provide these loans. Commercial real estate loans can be used to refinance existing real estate debt, buy new real estate, or renovate existing real estate.

Eligibility Criteria for Long Term Business Loan

• Age Criteria

  Applicants must fall within the age range of 21 to 65 years, ensuring a balance between the beginning of a professional journey and the approach towards retirement.

• Applicant Profile

  The long term business loans are designed for a diverse set of applicants, including established business owners, visionary entrepreneurs, and enterprises seeking sustained financial support for their growth initiatives.

• Credit Score Requirement

  A strong financial history is indicated by a recommended CIBIL score exceeding 700. This requirement reflects a commitment to financial responsibility and creditworthiness.

• Business Vintage

  A minimum operational history of 3 years is a prerequisite, underscoring the importance of stability and resilience in businesses applying for long-term financial assistance.

• Financial Performance

  Specifics regarding annual business turnover and profitability are subject to the policies of the lending institution. Meeting these financial benchmarks is crucial, demonstrating the applicant's ability to manage and grow their business effectively.

• Income Tax Return

  Applicants are required to have filed their Income Tax Returns for the last 2 consecutive years. This not only ensures financial transparency but also indicates compliance with tax regulations.

• Clean Financial Record

  A commendable aspect is the preference for enterprises with no previous defaults with any financial institutions. This signifies a commitment to financial discipline and reliability, factors that contribute to a positive long term business loans approval decision.

How to Apply for Long Term Business Loan

• Evaluate Your Eligibility:

  To apply for long term business loans first conduct a comprehensive self-assessment to ensure alignment with the lending institution's eligibility criteria, considering factors such as age, credit score, business vintage, and financial performance.

• Complete the Application Form:

  Obtain long term small business loans application form from the chosen lending institution, accessible both online and at the nearest branch. Provide precise and detailed information, outlining your business profile, financial status, and the purpose for which the loan is intended.

• Submit Application and Documentation:

  Submit the fully filled loan application form along with the required supporting documents to get long term business loans. This can be conveniently accomplished through the lender's website or in-person at the nearest branch. Ensure inclusion of essential documents like financial statements, business plans, and identification proofs for a thorough evaluation.

• Bank Document Verification:

  To proceed with the application for long term business loans, the bank initiates a meticulous verification process of the submitted application and documents. This step ensures the accuracy and authenticity of the information provided, involving a comprehensive assessment of financial statements, business plans, and other relevant documentation.

• Loan Approval Procedure:

  Post document verification, the bank scrutinises the application and makes a decision on long term business loans approval. Factors such as creditworthiness, business stability, and adherence to lending criteria influence this decision.

• Disbursement of Approved Loan Amount:

  Upon approval, the sanctioned long term business loans amount is disbursed to the designated bank account of the borrower. The timeline for disbursement is communicated by the bank during the application process.

• Strategic Utilisation of Funds:

  Businesses can strategically leverage the disbursed funds for intended purposes such as expansion, equipment acquisition, working capital, or other essential business needs. Effectively navigating the long term business loans application process demands meticulous attention to detail, transparent information provision, and adherence to the lender's stipulations. Clear communication with the lending institution and prompt fulfilment of document requests contribute to expediting the overall approval and disbursement process.

Documents required to apply for long-term business loans

Here is the list of documents that you may require while applying for a long-term business loan. Please note that these may change depending on the lender you choose:

• Business plan
• Passport-size photographs
• Application form
• Proof of Identity, age, income, & residence
• Business PAN card and copies of any required registrations, licenses, and permits
• Along with your profit and loss (P&L) statements, your company's bank statements dating back a full year are required.
• A copy of your Memorandum of Association (MoA) and Articles of Association (AoA).