Medium to long-term business loans

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Most businesses need a helping hand to either get them off the ground or expand. A medium to long-term business loan can be one of the best ways to get funding.

What is a medium to long-term business loan?

Medium to long-term business loans are a form of financial support that can help you run your business. They give you access to funds which will need to be repaid with interest by a set date, and you can use them in a number of ways, from helping start-up ventures to expansions of existing businesses.

Lenders generally prefer established business with a positive track record in revenue to ensure the repayment will be met, particularly for long-term business loans. This isn’t always the case however, so it’s a good idea to compare the best rates on the market specific to your business needs and request a quotation.

Is a medium to long-term business loan right for you?

Many business owners prefer a medium to long-term business loan as there’s a guarantee they’ll have funding in place to support their enterprise for several years. They can be worthwhile for those considering expanding their business or are in the initial stages of setting up their venture, helping you plan, budget and expand without being hindered too much financially.

Longer term loans

Usually ranging from one to five years, the repayments are made in monthly instalments with interest added to the amount you owe.

There are two types of business loans you can benefit from:

  • Fixed rates of interest: Fixed interest rates mean your payments won’t change over the loan term, regardless of market interest rates. This can provide you with financial stability, and keep you informed when it comes to how much and when you’ll need to repay.
  • Variable rates of interest: A variable interest means the amount you owe could vary over the loan term, depending on the index rate – this is usually, but not always, the Bank of England base rate. While the variable option means there is some volatility in the repayment, you are also likely to pay less interest over the whole loan.

It’s best to compare which lenders offer the best rates depending on your preferred type of business loan.

Advantages of a medium to long-term loan

A medium to long-term business loan can help with all the costs associated with setting up a business, such as:

  • Cash flow
  • Business expansion
  • Expenses

The longer the term of your loan the lower your monthly payments will be, as you’re spreading the cost over a longer period of time. This can be useful when you’re trying to get your business off the ground, meaning your monthly payments will be lower and therefore more manageable.

Interest rates also tend to be notably lower than if you were to opt for a short-term business loan.

Disadvantages of a medium to long-term loan

Taking out a business loan over a longer period may mean that your payments are lower than if you’d opted for a shorter-term loan, but it’s good to bear in mind that this ultimately means you will pay more interest overall.

Long-term loans also require a long-term commitment which is likely to impact your business for the remainder of the repayment term.

How much interest will you pay?

The amount of interest you pay on a business loan will depend on your individual circumstances, including the amount you are looking to borrow and the period of time you’d like the loan to cover.

If your business is just starting out, you will likely need to provide your personal credit rating to give the lender an idea of your financial situation. The higher your credit score, the more likely you are to be offered a loan at a competitive rate of interest.

Alternatives to medium to long-term business loans

As well as loans, there are several other ways that a business can secure funding. You may want to make use a business account overdraft which can provide you access to funds as and when you need them, making them useful for any unforeseen expenses. Business overdrafts are usually available for any period up to 12 months.

Alternatively, you can opt for a business credit card. These can provide a useful way to manage staff spending and usually give up to 56 days interest-free credit.

Other options include cashflow finance, which enables companies to borrow against the value of their unpaid invoices, and borrowing against assets – for example, business property or equipment.

Compare business loan providers

You’ll be able to compare quotes with MoneySuperMarket’s comparison tool which will take into consideration your business needs and the kind of loan you’re looking for. Answer a few questions and we’ll make finding the right option easy. Get the best medium to long-term business loan for your business today.

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