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Is Opting for a Long-Term Business Loan a Right Decision?

Published on Jul 12, 2022Updated on May 21, 2024

Is Opting for a Long-Term Business Loan a Right Decision?

Every business owner needs access to a line of credit or cash to ensure that the venture operates at its optimal levels. Among many entrepreneurs, the long term business loan has become a popular instrument to ensure that they have ready access to quick finance. 

Long term loans for business provide business owners with working capital that can be used to fund immediate business needs. 

The question is if business owners wish to take on debt in order to ensure that their enterprise runs smoothly. In order to decide if a long-term business loan is the best suited financial product for you, you need to analyse its pros and cons. 

Let’s take a look. 

Benefits of Long Term Business Loans

Both offline and online business loans come with the following benefits. 

1. Boosts Your Creditworthiness:

Debt can be good or bad. Debt is bad when you take a loan and are unable to repay it within the defined timelines. This can negatively impact your creditworthiness and make it difficult for you to get funds from lenders in the future. 

On the other hand, debt can be good when you fulfil your obligations in a timely manner. This positively impacts your creditworthiness and makes you eligible for future business loans from financial institutions. 

With a good payment track record, you can get really affordable business loan interest rates that convert into economical monthly EMIs. 

2. Helps To Scale Your Business:

You need a constant flow of funds not just to run your business but to scale and expand it too. Now add operating expenditures such as buying inventory, salaries, purchasing equipment, marketing efforts and more. The need for finance is never ending in a business scenario.

Instead of shelling out these funds from your savings, it makes sense to get a business loan. SMFG India Credit offers unsecured business loans for up to Rs 75 Lakhs* without the need to pledge any collateral with flexible tenures upto 48 months*. Simply run a business loan eligibility check to see if you qualify. 

3. Avoid Debt Traps:

Business owners on many occasions opt for lines of credit that can have serious financial implications. Funding operational expenses through credit cards is one of the most common ways for entrepreneurs to fall into a debt trap.

If you are unable to clear your payments in time, credit card interest rates can range up to 45% on the total amount due to the lender.

4. Long Term Business Loans:

on the other hand, are not only collateral free from SMFG India Credit but come with flexible repayment tenures  upto 48 months*. We also offer business loans secured against property upto INR 5 crores with flexible tenures between 12 to 180 months. Using our EMI calculator, you can choose the product and the tenure that is most convenient in terms of the EMI amount so that the loan helps to meet your business needs without being an added burden on your pocket.

5. Save Money in the Long Run:

Other means of financing such as overdraft facilities require one to secure their loan with a fixed deposit, and have very short tenures. Even though the access to funds may be instantaneous, there is a risk of falling into a debt cycle.

Business loans can be your saviour where you can apply for a loan amount of up to Rs 75 Lakhs* at affordable interest rates. With easy monthly repayment options and flexible tenures, paying back the loan amount to the lender can be easily budgeted into your monthly business expenditures.

You can always use the business loan EMI calculator to get a near accurate estimate of what your monthly EMIs will be.

This is also a great way to monitor your business spending and save money in the long run. 

Must Read: Business Loans or Overdraft - Which one is Better?

Drawbacks of Long-term Business Loan

While the benefits of long term loans for business are evident, you can only make sure that it is the right avenue of finance for you if you are aware of its drawbacks as well. 

1. May Not Be Eligible:

Business owners who have only recently started operations or who are planning to start one may not qualify for a business loan from any financial institution in India. This is because lenders require borrowers who have a proven track record of business existence and stable profits.

Most will require the business to have been in operation for a minimum of 3 years, and a stable history of profits / revenues for the past 2 years. The loan amount sanctioned will depend on several factors, including the applicant’s credit score & history, net disposable income, and the lender’s policy.

2. Long Drawn Process:

Just like any loan, business owners will be required to make a formal loan application and submit all the necessary documents for a business loan to the lender. This is usually followed by a verification process to check if the application, paperwork, and credit score of the borrower are in order. Only then, is the business loan approved. 

All of this can be time consuming, particularly if the applicant does not have all the documents ready, and may not be ideal if the business owner is in need of instant funds. In such situations, the prospective borrower will have to explore alternative avenues such as an OD facility. Thus, it is advisable to always check the required documentation and make sure you have it ready with you before applying for a business loan.

3. Collateral Risk

If you have chosen to go for a secured loan against property in order to expand your business and take the advantages of a long term business loan, please note that inability to repay the loan could cause the lender to repossess your asset.

Must Read: Types of Business Loans in India

In Conclusion

As a business owner, whether you wish to opt for a long-term business loan is a decision that only you can take. 

Take into account your current financial situation. Also being aware of the upside and downside of business loans can help you arrive at an informed decision.

If you need more information on long term business loans from SMFG India Credit, you can always reach out to us on our toll free number on 1800 103 6001 between 9 am and 7 pm Monday to Saturday (except Sundays, 4th Saturday of the month & public holidays) or send us an email to  

* Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG India Credit. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG India Credit's policy at the time of loan application. If you wish to know more about our products and services, please contact us

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