Is a Long-Term Business Loan Right for Your Company?

A long-term business loan is extremely attractive for business owners due to its lower monthly instalments. Nowadays, you can even apply for business loan online, making the process easier and quicker. Additionally, there are several other advantages that you can enjoy if you opt for a long-term business loan. 

Benefits of a Long-Term Business Loan

The benefits of a long-term business loan are as follows:

  • Extensive loan amount

Usually, the funds required for a business is extensive. A long-term business loan is thus extremely beneficial as it offers a high loan amount to cater to urgent business expenses. You can use this money as working capital to purchase raw materials, buy machinery, refinance debts, etc. This would help you expand your business and escalate it to the next level.

  • Zero collateral required

One of the advantages of a long-term business is that you do not have to mortgage property to get loan approval. This is time-saving as you do not have to arrange additional property documents for loan approval. Also, you will not fear losing your property in case of default. 

  • Availability of Flexi-loan facility

A Flexi-loan facility often accompanies a long-term business loan. You can withdraw the loan at your convenience and pay EMI only on that amount. This allows you to save a lot on your monthly instalments and invest that money to expand your business or fund other business expenses. Also, there are minimal foreclosure charges which result in additional savings.

  • Flexible loan repayment tenure

When you are opting for a long-term business loan, you have the flexibility to choose the loan repayment tenure. This helps you to plan your finances as per your profits and expenses. Additionally, for a longer tenure, the monthly instalments are quite less. This enables you to save more for reinvesting.

  • Instant approval and disbursal

Instant loan approval is another attractive feature of a long-term business loan. Timing is crucial in a business. Thus, an instant loan approval at the right time can work wonders. Once you complete the loan application, it is approved instantly, provided the application is error-free. You can also receive the loan amount in your bank account within a few hours to just a day. 

Apart from all these benefits, there are certain limitations that you must take into consideration before deciding on a long-term business loan.

Limitations of Long-Term Business Loan

Below are a few limitations that can pose as a hurdle during opting for a long-term business loan leading to rejection of a loan application:

  • Extensive documentation

While applying for a business loan online, you will be required to upload many documents to complete the application process. These must be done carefully as any error can result in the rejection of the loan application. 

  • Requirement for a higher credit score

Since a long-term business loan is an unsecured loan, you will need a higher credit score to project yourself as a creditable candidate on whom lenders can rely for timely EMI payments. This is not a day’s job and requires months and years of strategic planning to achieve a higher credit score. If you lack one, then you might face problems during loan approval.

Eligibility Criteria for a Long-Term Business Loan

The eligibility criteria for a long-term business loan are somewhat similar to MSME loan but still have a few differences, which are as follows:

  • Age range from 26 to 66 years
  • At least 3 years of business vintage
  • ITR of the business must be present for the previous years
  • An audit of the business by a reputed CA

Steps to Apply for a Long-Term Business Loan

You can easily apply for a business loan online within a few steps:

Step 1: Visit the official website of the chosen financial institute

Step 2: Navigate to the business loan section 

Step 3: Check the eligibility criteria to apply for a business loan

Step 4: Fill out the application form with accurate details

Step 5: Upload the necessary documents

Step 6: Submit the application form and wait for approval

Documents Required for Long-Term Business Loan

Below are the documents that you must keep scanned to apply for a business loan online:

  • A perfect business plan
  • Income proof from business
  • Identity and address proof
  • Proof of business vintage
  • Last 12 months’ bank statement
  • A copy of MoA (Memorandum of Association) and AoA (Articles of Association)
  • Relevant registrations, PAN cards, permits, and licences of your business
  • Additional documents as per lenders’ requirements

Now that you know all the pros and cons of a long-term business loan, you can decide if you must opt for one. Also, once you have decided to move forward with one, it becomes mandatory to review the accuracy of the information that you provide when you apply for business loan online to prevent loan rejection.