Do you need long-term financing for your business? You’re not alone. Many small businesses are turning to long-term loans to get the funds they need to grow their company. But where should you start looking for long-term financing options, and what factors should you consider before taking out a loan? Keep reading this blog post for some great information on long-term business loans!
What are Long-Term Business Loans?
As the name implies, long-term loans offer an extended repayment period of up to ten years or more with fixed payments and interest rates that are reasonable if they’re well under the prime rate. As a result, long-term loans are an attractive option for many business owners who need funds to grow but don’t have enough cash in hand currently.
What’s the Difference Between Long-Term Loans and Short-Term Options?
Long-term loans usually have lower interest rates than short-term loans. However, they also offer a higher initial loan balance.
Term loans are granted for an amount of time at a fixed interest rate that both parties agree on beforehand. Hence, the borrower knows what they’re getting into before signing anything. Once the agreement is set in motion, both parties can terminate it only when it expires.
Short-term options usually run between six months to three years, with most falling around the year mark. As a result, these financing plans are less popular because their repayment schedules aren’t long enough.
If you need cash to invest in a business that will generate revenue straight away, then a short-term loan is the right choice. Although the interest rates may be slightly higher, the additional income helps pay the balance at a swifter pace. If you want professional advice, contact Versa Business System, serving customers nationwide in the US.
How to Qualify for a Long-Term Business Loan
Long-term loan applicants should be aware that most lenders require them to provide a collateral such as property or possessions to qualify.
Business owners who own their office space will not need any additional collateral if they use their building’s worth when applying for a long-term loan. However, these borrowers cannot create new equity by having more than 20% equity in the real estate, making obtaining this type of loan difficult.
A borrower’s credit score plays a critical role in qualifying for long-term business loans. Credit scores over 650 make qualifying easier because lenders are typically more likely to approve such applicants.
When to opt for a Long-Term Loan
The decision to opt for a loan usually depends on your business needs and goals. For example, if you want to drive short-term revenue or need extra cash, then a short-term loan makes more sense. However, more extensive plans, including acquiring another business, opening a new store, or purchasing real estate, usually require long-term loans.
If you require professional consultation to develop the right funding strategy for your small business in Colorado, or nationwide in the USA, Versa Business System is at your service. We help small businesses achieve their financial goals by offering long-term business loans. Apply for funding and explore the possibilities that emerge with securing financing.