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Long-term business loans

Find the right long-term business loans for your organisation

published: 08 December 2022
Read time: 5 minutes

Long-term business loans can be ideal for business owners who need funding for an extended period of time

What are long-term business loans?

A long-term business loan is a way of borrowing that can provide your company with the required capital to grow, expand, and fund its day-to-day operations. In contrast to more traditional deals, it allows company owners to gain funding for a longer period.

Entrepreneurs tend to opt for long-term business loans when they need to cover the expenses of substantial expansions or investments. This could be anything from purchasing new premises to buying expensive tools and equipment.

The borrowing conditions of long-term business loans can be more favourable, flexible, and affordable than other business loans, giving business owners the chance of spreading repayments more comfortably.

Who can benefit from long-term business loans?

Every business has its own set of requirements, but when it comes to long-term business loans, there are some companies that may benefit from them more than other firms.

  • Business owners looking to expand. Growing a business usually comes with large expenses. A long-term business loan can supply a substantial amount of money to help cover the costs. 

  • Start-up businesses. A new company often needs a significant amount of cash to get up and running. Long-term business loans can give the boost to begin your trading journey while keeping repayments affordable. 

  • Businesses that can’t afford cashflow pressure. If you need money to fund your commercial operations and aren’t able to afford costly repayments from the outset, long-term business loans can be a good option because you can spread the repayments over a longer period.

How to qualify for long-term business loans

There are many factors that may determine whether your application for a long-term business loan is successful.

Lenders will look for a good credit score. Credit records are often used to understand whether you are a reliable borrower because your personal and commercial credit scores show if you pay your bills or other loan commitments on time. 

Having an established business can also increase your chances of having a long-term business loan approved as it shows you have trading experience. Having at least a couple of years’ experience can help with a smoother application process.

Lenders will also want information about your annual revenue. This way, they can get an idea of your business’ financial performance and determine whether you’ll be able to sustain your loan repayments.

What are the advantages of long-term business loans?

Long-term business loans have several benefits. Here are some to take into consideration:

  • Variety of uses. You can use them for whatever business-related needs you wish. This can include buying new equipment, paying employees’ salaries, expanding your company, or simply boosting your cashflow to cover day-to-day expenses. 

  • Lower interest rates. Interest rates of long-term business loans can be lower and more favourable than the ones on shorter-term options. 

  • More flexible repayments. Long-term business loans have lengthier repayment terms and conditions and can offer more options as to how and when the money is repaid. 

  • Fixed monthly payments. Long-term business loans tend to come with fixed monthly repayments. This can be useful for budgeting purposes, as you will know exactly how much you owe your lender each month.

What are the drawbacks of long-term business loans?

Long-term business loans also have some disadvantages. Here are a few you may want to take into account:

  • Lenders may ask for security.  Some long-term business loans may require you to put down assets as security. This means if you’re unable to repay your loan, the lender can seize your possessions. 

  • Costly fees. On top of your standard loan repayments, you will also be faced with some other charges, such as origination fees. These fees can add up, making it more costly to borrow money.   

  • Longer and recurring repayments. If you take out a long-term loan, you have a lengthy repayment period. Should your income decrease over time, you may find it more challenging to pay back what you owe each month.

Are there any alternatives to long-term business loans?

If long-term business loans are not the right solution for your company, there are alternatives you can choose. Here are some of the options you can pick from:

  • Invoice financing. This type of business funding works as a monetary advance to boost cash flow, rather than as additional finance for large projects. It often involves a bank buying up your unpaid invoices or lending you money against the value of the accounts receivable. 

  • Business credit card. With a business credit card, you can usually borrow more money than you would with a personal credit card. This is because how much you can borrow will be based on your business income. You may also be able to benefit from cashback or rewards. 

  • Crowdfunding. Crowdfunding campaigns could be a way to raise large sums of money for your business. Bear in mind that you will need a valid business case that will persuade people to contribute to the campaign. 

  • Business account overdraft. This type of business financing can be useful if you need to borrow money in an emergency or over a short period. However, it is worth making sure this is the right solution for you, as interest rates tend to be quite high.

Other useful guides

If you're interested in a business loan, we have many guides to get you clued up:

Start-up loans

Short-term business loans explained

How to get a business loan

How to compare long-term business loans with MoneySuperMarket

Our aim is to help you compare long-term business loans in an easy and straightforward way. 

Tell us what you're looking for

We’ll ask a few simple questions about how much you want to borrow, your business, and what the money will be used for.  

Compare deals 

We’ll show you a list of potential deals including the interest rate and how much your monthly repayments might be.  

Apply in minutes 

Once happy with your choice, you can click through to apply quickly and easily online. Then wait for your funds to arrive.

Frequently asked questions

What is the longest term I can get a loan for?

Long-term business loans generally range anywhere from 5 years to 30 or more, but it will depend on your situation, your lender, and the loan deal you apply for.

The good thing about longer-term deals is that the cost of your monthly repayments will be brought down, making it more affordable to pay back your debt each month. However, bear in mind that you’ll end up paying more interest overall.

Can I get a long-term business loan if I have poor credit?

Lenders want to be sure that you’ll be able to repay what you owe them, so if you have bad credit, you may find it more challenging to get a long-term business loan.

This doesn’t mean that you won’t be able to find a long-term option for you and your firm. As long as you demonstrate that you’ll be able to afford the repayments, you should be able to borrow what you need. But it’s likely that the interest rate will be higher and your loan more expensive overall.

Do I need a guarantor for a long-term business loan?

No, not necessarily. You should be able to get a long-term business loan without the need of a personal guarantor.

That said, if you have a poor credit rating, a guarantor with good credit history may increase the chance of success of your application. Generally, a guarantor is a family member, close friend, or partner who will take over the loan if you’re not able to pay back the debt yourself.

Keep in mind, though, that guarantor loans may come with higher interest rates. Not only that, but they can be a risky financial commitment for both you and your guarantor.

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