Business July 19, 2018 Last updated July 19th, 2018 223 Reads share

Long-Term Business Lending Helps Struggling Startups Establish Creditworthiness

Long-Term Business LendingImage Credit:

It is hard to save enough cash on hand for expensive investments. No matter your business’ success, it is difficult to divert funds on hand for unexpected business needs. Long-term business lending is something that can help keep you financially secure and help build your credit and improve your business all at the same time.

There are numerous benefits associated with long-term business loans. You should strongly consider this type of loan. In some instances, it is wise to secure a long-term loan from a bank instead of seeking the help of investors or other short-term lending options. Your business is the priority and you should choose an option that helps your business thrive.

Small Business Owners Need to Establish Business Credit 

There is a very structured process associated with long-term loans. The payments will be regular and very consistent. As long as you continue to pay them on time, your credit score will go up or remain in good standing. It is important for a business owner to have good credit because you never know when you will need another loan to help your business endeavors. Positive credit history is a major bonus for any business owner. No business can secure a loan without good credit history and most businesses don’t have success without securing a loan during difficult times.

Clients may also check your business’ creditworthiness prior to signing a large contract. Your corporate credit report tells a story. Reliable payment history and wise debt management can make all the difference.

Interest Rates are Lower if You Offer Collateral

It is typical for long-term loans to have lower interest rates than more short-term lending products. This is because in exchange for the loan you have to offer collateral to the lender. If you take out a loan for a car and default on your payments, the lender gets possession of your car. As a result of collateral being part of the agreement, a high-interest rate is not necessary. The low-interest rate allows your business to prosper without wasting  hard-earned money to pay for the money that you have borrowed.

Long-Term Business Lending Helps with Steady Cash Flow

A long-term loan gives you the freedom to make immediate investments to better your business. If you saved large amounts of money to invest in an asset or project you would have to wait an extended period of time. It is also dangerous to decrease the amount of cash that you have on hand. You can enjoy flexibility with a long-term loan and keep your business your main priority. An immediate decrease in cash flow can be detrimental to businesses. The loan allows you to spread out your investments and maintain the cash that you have on hand.

Low Maintenance: Apply Once for All the Cash Your Company Needs

While short-term loans can be of great benefit to entrepreneurs, they require entrepreneurs to jump through a series of hoops – over and over again – to secure approval. Most companies that use short-term lending will apply multiple times to get all of the cash they need for the long haul.

There is an extensive process to secure a long-term loan, but it requires very little maintenance down the road. A short-term loan is going to change over time, so it needs to be monitored rather often. A long-term loan is structured and after the initial time investment in the beginning, there is little to no maintenance required. Long-term business loans are great for entrepreneurs because they can focus more of their time on their business, and less worrying about monitoring their financial loan, or applying for another one.

Minimize Investor Frustrations

A long-term loan makes it less likely that you will have to seek assistance from business partners or other investors. Once someone has invested in your business, they have some control over your decision-making. A business owner wants the least amount of outside influence as possible. You are the business owner, you don’t want to become just a puppet. By securing a long-term loan you essentially cut out the middle-man and have full control. It is important that your loan remains in good-standing or else you could be hearing from your lenders. Default payments will almost immediately result in interference that will negatively impact your business endeavors.

Fixed Rate Business Loans are More Predictable

The interest rates associated with most long-term business loans are fixed. This allows you to be well prepared for the amount you will owe every month. Knowing this allows you to properly prepare your budget and know up-front how much you need to set aside to make a payment.

In addition to this, you are also able to purchase things that you otherwise wouldn’t be able to do without this financial assistance. A long-term loan allows you to buy something upfront without you actually having the funds. Instead, you are able to budget out this purchase via your monthly payments. You are able to work with your lender to figure out which repayment plan aligns best with your finances and business goals.

Financial Stability

Your business can maintain stability with a long-term loan. A short-term loan can quickly have its terms changed, and your cash flow can be cut off. Long-term loans require extensive paperwork and very detailed formal contracts. Long-term loans are at a fixed rate that is very predictable. This ensures the business owner that they will have the security of their loan to help with business expenses and maintaining business stability.

Provides Additional Leverage

A business owner invests in their business and relies on it for income. A long-term loan can be viewed as a way to increase your personal leverage. You are leveraging your business and investment to increase your returns. Your loan expands on your initial investment. Used effectively, you will increase your monetary return.

If you are in need of a loan for your business it is important that you weigh your options. There are numerous benefits associated with long-term loans and they can help your business thrive. Long-term loans are the traditional way of securing finance for your business, and it is secure. You should view a long-term loan as a long-term investment. Your business will be able to grow and increase productivity once you secure those extra funds. You should strongly consider choosing a long-term loan so you can better your business all while improving your credit, maintaining the cash you have on hand, and avoiding interference from investors.

Suggested Reading: As an alternative to traditional lending, crowdfunding is only becoming more popular.

Dipa Singha

Dipa Singha

I am Dipa Singha, a professional writer; my passion for learning and sharing also made me a Writer and an Entrepreneur. I believe every one of us should share our experiences with the each other as it helps us evolve and learn more. I write on topics which are related to technology, finance, marketing and management.

Read Full Bio