Long-term loans are typically loans with repayment terms of at least a year or longer. For instance, mortgages and student loans are long-term loans with significant repayment periods of about one to three decades.
When it comes to your business, taking a long-term loan can have multiple advantages, along with some drawbacks. At the same time, identifying whether your business needs a short-term or long-term loan can be the fine line between gaining profits and running losses.
There are several situations where a business will need a long-term loan, such as business expansion, renovations, and acquisition of real estate. If you are unsure if your business needs a long-term loan, here’s what you need to know.
1. Your business situation
Whether you are getting an instant cash loan in Singapore or opting for a long-term loan, understanding the situation of your business is the first step. From hiring new employees to purchasing expensive equipment or adding essential upgrades to your office, you should check the situation of your business before making a decision.
At the same time, making multiple forecasts can ensure that you won’t be running losses in the coming years so that your business loan is able to yield a significant profit.
2. Funding amount
Many short-term business loans have a low funding amount and a short repayment period. A business that requires a few hundred dollars are often able to benefit from these types of loans. If your business needs a significant amount for a bigger investment, a long-term loan is the best option for you.
Long-term loans are designed to help businesses receive a large amount of cash upfront, which they can use to pay for things like commercial real estate, equipment, perform improvements and clear their inventories. On the contrary, taking out a long-term loan when your business is not yet able to pay for all associated costs can hurt your ability to grow and expand.
3. Customisation options
When taking out a long-term loan for your business, the licensed moneylender won’t just be your service provider. They will be your partners. They want to see you succeed so that you can pay them back, and they will be willing to make any favourable adjustments to help you achieve success.
One way they can help is by creating customisable options to suit your specific needs. For instance, when customising your loan amount, you can choose the loan period to repay your loan, how much you want your monthly payments to be, and how you want to make those payments.
Before signing the necessary papers, make sure to read through the fine print to ensure that the loan provider has customisable options available for you.
If you are a business owner and you have recently encountered a financial hurdle, taking out a short-term loan could be a viable option for you. At the same time, you can take out a long-term loan if you have a long-term business need that spans many years.
Overall, assessing your options and evaluating your repayment ability is the most viable way to determine whether your business requires a long-term or short-term loan.