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Tata Capital > Blog > Loan for Business > Is a Long-Term Business Loan Option Right for You?

Loan for Business

Is a Long-Term Business Loan Option Right for You?

Is a Long-Term Business Loan Option Right for You?

Finding the right finance option for your business means you have won half the battle already. After all, adequate funds are key to raising potential profits and keeping a business thriving. Availing business finance is the smartest way to ensure a steady cash flow for your project. It enables you to promote growth, minimise operational costs and maintain a healthy influx of capital. 

While the potential for your business can be high, there’s just one problem: getting started. Most businesses go through the initial stages of a capital crunch. While it may not be severe, it could still pose enough challenges to have the needed pickup.

Every business financing option comes with a business loan eligibility, loan tenure, and interest rate. Hence, you must assess your financial situation before choosing a lender and business finance offering. You can also choose between a short-term or long-term loan based on your purpose and requirements. Read on to find out whether long-term business finance is suitable for you or not.

Short-Term vs. Long-Term Business Loan

Most reputed financial institutions provide the option of short-term and long term business loans. If you require immediate cash with quick approval from the lender, opting for short-term business finance might be ideal for you. As the name suggests, a short-term loan provides shorter repayment tenure that might range from one to three years. Besides, the loan requires less documentation and no collateral.

A long term loan for business, however, offers longer repayment tenure and a competitive interest rate. Thus, long term loans are suitable for big-ticket investments. Besides, it is a go-to type of financing option for established businesses in need of a large capital amount.

This is why a commercial loan can prove useful. But you may still wonder if it is the right option for you. We break it down so you can see for yourselves.

Benefits of a Long-Term Business Loan

Here are some advantages of taking a long-term loan for your business:

Extended Repayment Tenure

The repayment tenure for a long-term loan is much higher than a short-term loan. It usually ranges from 10 to 15 years, and even more in some instances, making it appropriate for long term projects like acquiring new assets, improving business infrastructure, etc.

Lower Interest Rates

A long-term commercial loan tends to have much lesser interest rates than standard loans. As the interest charged on long-term loans is comparatively lower, it can be useful if you need a lesser rate of interest, as you may need more cash at hand.

However, before settling on one, it is advisable to compare multiple lenders and their long term business loan interest rates.

Small EMI Payments

Another advantage of long-term business finance is that you will have to pay lower monthly payments. The longer loan tenure leads to shorter EMIs, which are much easier to manage with your monthly cash flow cycles.

High Funding Amount

Commercial lending gives you higher capital at attractive business loan interest rates. These long-term loans are tailored for companies to finance their costlier goals like real estate, inventory, acquisitions, equipment etc. Thus, the loan enables you to get large funding from the lender.

Preparing for the future

Your capital needs may not be just for the present but also for the future. As commercial lending gives you more than enough cash to sustain, it can be a viable option for the years to come.

Get more loans in the future

Because business loans have a large tenure, loan repayment can be spread out over years instead of months. When you make these payments on time, you increase your credit score, building credibility as lenders have more trust in you. This, in turn, makes your loan candidature much more attractive and increases your chances of availing of a loan in the future.

The Bottom Line

While every financing option has its pros and cons, you must decide, considering your needs and business goals. Depending on your existing needs and your plans for the future, a commercial loan can be a great option if planned properly. If you are looking for long term loans to cover your business’ longstanding financial requirements, turn to Tata Capital. We offer customised business loans at attractive interest rates and special features like online application, quick disbursal, and easy eligibility. You can also use Tata Capital’s EMI calculator to get a clear estimate of your monthly repayments. To find out more, visit our website today!

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