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Long-Term Business Loans
Stretch out your loan term and ensure your deal is manageable by comparing your options with Savvy.
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Can I get an unsecured business loan with a long loan term?
Yes, you can. While many unsecured loans are paid off relatively rapidly – often within a year or two – it’s possible to get loans to invest in your business with terms of five years or more, allowing the loan amount to be steadily paid off over time.
One of the most significant advantages of this approach is in the cost of repayments. A reality of loan finance is that the longer the loan term, the lower each individual repayment needs to be. So an unsecured loan with a relatively long term will have lower repayments, and less impact on your business’ monthly budget.
Of course, the trade-off for this is that a longer loan term and larger loan size also means a greater overall cost – there's more time for interest to accrue, meaning your overall cost for the loan goes up. But sometimes this can be a worthwhile exchange for the lower repayments.
With a higher overall cost, this means getting an affordable rate is more important than ever, so if you’re considering an unsecured loan as a long-term option, it’s worth carefully comparing your options and making sure you’re going with the lowest rate available. That generally means your first port of call should be an online comparison website – like Savvy – where you can quickly compare finance options a range of Australian lenders and find the best rate on offer for a long-term loan for your small business.
What other options are available for long-term business loans?
There are other options available for finance over a long period, if you’re in a position to take advantage of them.
One of the most obvious possibilities is a secured business loan – where you’ve offered a significant asset as collateral for the loan. In addition to offering lower interest rates and larger amounts, secured business loans normally have far longer loan terms than an unsecured loan – starting around the 3-5 year mark and potentially going well over 10. The longer terms allows for lower repayments, while the lower interest rates keep the overall cost of the loan lower. Taking out a $100,000 secured loan would cost you less than a $100,000 unsecured loan in almost all cases.
The catch is that you need a significant value asset to offer as security – something like a business property. This often puts these loans out of reach for smaller businesses – who don’t always have many assets to speak of.
Another possibility is business credit facility, such as a line of credit, business overdraft, or business credit card. These can potentially be available to you for a significant period of time – a business credit card is generally permanently available until you choose to close the account. This means you have access to readily available funding on a permanent basis. However, while this is useful for short-term expenses and sudden unexpected costs, the high interest rates on most business credit makes it a poor choice for funding that you need over a prolonged period.
Types of business loan
The most common type of business finance, unsecured loans enable businesses to access the funds they need without attaching an asset to the loan as security. Some lenders may allow you to borrow up to $500,000 and, because there's no collateral, offer same-day approval.
If your business already owns valuable assets, such as property or expensive equipment, you may choose a secured business loan instead. These loans may increase your borrowing power beyond what an unsecured loan can offer and, crucially, typically come with lower interest rates.
Business loans don't always have to be worth hundreds of thousands. If you're operating a small business and need a boost to help you keep on top of your expenses or expand your company, you may be able to take out a loan starting from as little as $5,000 and unlock further capital.
Just because you don't have all the required documents for a standard business loan doesn't mean you're out of options. Low doc finance enables you to use alternative documentation, such as other business financials, in the application process to access the funds you need.
A commercial line of credit allows you to draw from your loan account whenever your business needs access to their funds, instead of managing a lump sum and repaying it like a regular loan. This can add flexibility to your finance arrangement, providing money when you need it.
Invoice finance presents another option to business operators looking to free up cash through outstanding invoices yet to be paid by their customers. Your invoice finance can either be invoice discounting or factoring, which present different options when it comes to your invoices.
A common reason for seeking out a loan is to purchase commercial equipment. You can do this either with an unsecured arrangement or one with the equipment itself as collateral, with the latter potentially increasing your borrowing power and lowering your interest rate.
With this finance, when your business purchases product, your supplier provides an invoice which you send to your financier and pledge to repay by a set date. From there, your supplier sells the invoice to your financier at a discounted rate, while you repay the full amount to your financier.
Under an inventory finance agreement, your lender pays your supplier directly for inventory, which allows it to be signed off and sent to you. From there, you can pay off your debt within a pre-determined period to your lender, which may be longer than the regular debtor period.
An overdraft facility is attached to an existing financial account belonging to your business, such as a transaction or savings account, and enables you to borrow up to a set limit after the account’s balance reaches zero. These overdrafts are repaid with interest, but only on what you use.
You may simply be in a position where your business needs a boost to its cash flow. If this is the case, there’s a range of stop-gap solutions which may be suitable for your situation, from standard unsecured loans to specialist cash flow loans, invoice finance or even an overdraft.
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How do I go about getting a long-term unsecured loan?
Get online & compare your options
The first step is to see what your options are, which means getting online and comparing options. Interest rates change frequently, and rates offered by each lender can fluctuate, so it’s always best to compare the current crop of business loans and find the best rates available right now. Build a top three or top five list of options to explore.
Research each option
Once you have your list of favourite options, jump over to the lender’s website to do a little homework. Find out what additional fees the lender might charge, and what other features they offer – like flexible repayments, or a redraw facility – and what options they have for long loan terms, of course.
Apply
Once you know your preferred loan and lender the next step is to apply for the loan. Traditionally this used to involve taking your financial paperwork into a branch, but nowadays the far more simple and convenient option is to apply online. This has proved so much the case in recent years that many modern online lenders don’t even have physical branches.
Generally, an online application is quite straightforward, and can be competed ion 5-10 minutes provided you have your financial records easily to hand.
Submit supporting documentation
Once your application is submitted and being reviewed by the lender, they’ll normally ask for some supporting documentation, including bank statements (for you and the business), financial and tax records, and personal ID.
These will generally be sent electronically.
Get approval & get paid
Once your information has been reviewed, your application can be approved. The lender will then send you final documentation (including your final loan contract) to approve and submit.
Once you’ve done that, the loan is finalised and the money should be arriving in your bank by electronic transfer soon after (sometimes delayed a little by your bank).
Frequently asked questions about long-term business loans
It’s not uncommon for a fixed rate loan (also called a fixed term loan) to revert back to a variable rate after a set period of time. This will generally be between one and five years, so it is quite possible this will happen during the life of a long term loan. The time period is generally discussed and set when you set up the loan however, so you should know exactly what you’re getting.
The majority of business loans will allow you to make additional repayments to a loan to pay it off quicker. It’s worth checking if your lender has any fees that apply when you do this though, as that can potentially lessen the benefit a great deal.
No. The approval process should be entirely the same regardless of the loan term.
It’s possible, but not generally a good idea. Firstly because multiple loan applications can hurt your credit score. Second because it might be harder to get finance approval if lenders can see your business has an outstanding long term loan.
Yes. Unsecured loans can be for as little as $5,000, so it’s entirely possible to get a small $5,000 business loan with a five-year long loan term. It’s certainly not common, but it’s possible.
If it’s available, it can be pretty handy. A redraw facility allows you to pay extra on the loan – shortening the loan and earning less interest – but then recover those extra funds if you find yourself needing them. It’s a handy feature to have, especially on a loan that you’ll probably have around for a while.
Helpful business loan guides
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