Long-term business loans are preferred by borrowers over short-term loans because they offer larger loan amounts with longer repayment terms. The terms can last for up to five years, depending on the demands of the company and the lender’s discretion.
These long-term business loans may have fluctuating or fixed interest rates set by financial institutions. The interest rate is typically lower than short-term loan interest rates, resulting in reduced monthly payments. In addition to interest, business firms are also required to pay additional costs, such as processing fees, which vary depending on the lender.
Benefits and Features of Long-Term Business Loans
Long-term loans are deliberate decisions characterized by a longer repayment period. The following are the main features and benefits of long-term loans:
Flexible Loan Facility
Long-term business loans often have lower interest rates. The monthly payment is usually lower because the total amount is spread out over a longer period, allowing you to manage your debts better.
Flexible Repayment Plan
The borrower can choose the repayment plan that best meets their needs. This flexibility reduces the burden and likelihood of default by lowering the EMI (Equated Monthly Installment).
No Collateral
You do not need collateral. Lenders can use creditworthiness to approve small business loan for the long term.
Online Loan Application
You can apply online for quick loan approval.
Purpose of a Long-Term Business Loan
Long-term business loans can be a good option for those who need a larger loan amount with a longer repayment period. Long-term loans make it easier for businesses to repay their loan amounts due to manageable EMIs. Established companies with solid financial histories are more likely to be approved for long-term business loans, which can have a maximum repayment period of five years. Here are some reasons why business owners choose long-term financing:
- Purchase of a commercial property, such as a land parcel, office building, or any other type of commercial property
- Capacity expansion
- Launching a product or service
- Purchase of a new commercial vehicle or equipment
- Acquisition of assets
- Upgrade of office infrastructure
- Recruitment of new talent for expanding the workforce
Long-Term Business Loans Interest Rates and Charges
You should be aware of all the charges that will affect your borrowing costs, including processing fees, interest rate, and other fees. Here is a detailed look at the long-term interest rates for business loans:
Interest Rate
15-30%
Processing Fees
Maximum of 2.50% of the loan amount
Bounce Charges or Dishonour Charges
Rs. 700/- (Per Instrument)
Mandate Rejection Service Charge
NIL
Document Processing Fees
- Up to Rs. 5.99 Lakh: Rs. 2,000 plus GST
- If the loan amount is greater than Rs. 6 lakh: Rs. 7,000 plus GST
Foreclosure Charges
In the first 12 months after disbursement, foreclosure is not permitted. After the loan is closed, there will be a 4% foreclosure fee plus any applicable taxes.
Loan Cancellation Charges
Rs. 1,000 plus GST
Payment Instrument Swapping
Rs. 500 plus GST
Eligibility Criteria for a Long-Term Business Loan
Small business loans are available to those who meet the following criteria:
- Self-employed individuals, partnerships, private limited companies, and business owners engaged in manufacturing, trading, or service industries.
- Persons with at least five years of experience in business and three years of expertise in their current industry.
- The applicant cannot be more than 65 years old at the maturity of the loan.
- Businesses that have generated profits in the last 2-3 years.
Documents Required for a Long-Term Business Loan Application
Lenders require the following documents to process long-term business loans:
- Completed application form
- Passport size photograph
- KYC documents
- Business financial statements
- Business registration details
How to Apply for a Long-Term Business Loan
Follow these simple steps to apply for a business loan:
- Apply for a business loan on the lender’s website by clicking the “Apply Now” button.
- Verify your mobile number by completing the online application and entering the OTP.
- Enter your business loan information.
- Include any additional information in the application form.
- You will receive a reference code for the next steps.
- After verification, you will be sent a loan offer that includes the approved loan amount and applicable business loan interest rates.
- Accept the loan to receive a quick disbursement to your account.
Conclusion
Long-term business loans are designed to provide funding for unexpected or planned expenses. Lenders offer business loans up to Rs. 40 lakh with reasonable interest rates. The repayment terms are flexible, with durations of up to five years. It is important to evaluate your company’s current financial situation before applying for a long-term business loan. Business loans are a great way to get the funding you need to grow your business and succeed in the market. Use an easy-to-use EMI calculator before deciding to borrow money for a long-term business loan.
