Long-Term Business Loans: What They Are and How to Secure One in the UK

Long-term business loans are a powerful tool for sustainable growth. If you’re an established SME looking to grow the business without giving up equity, long-term business finance could act as a low-risk strategic boost and a flexible funding solution for major investments. Whether you’re planning the purchase of new property or looking to hire and train new staff, this form of business finance could be the perfect fit. With manageable repayment plans, a long-term business loan is also a great choice for business finance that doesn’t drain your day-to-day cash flow. Below, we consider what a long-term business loan is in the UK, what you’ll need to do to get one and the different factors you should consider beforehand. 

What is a long-term business loan? 

A long-term business loan is a loan with a repayment period in excess of a year. They are often used to finance significant investments, expansions or acquisitions. A long-term business loan is usually secured against assets like property or equipment and often requires a Personal Guarantee. 

What is a Personal Guarantee? 

A personal guarantee on a business loan is a legally binding agreement where a business owner or director personally promises to repay the loan in the event the business fails to do so. In simple terms, it means your chosen lender can pursue your personal assets (i.e your vehicles, investments and property) to recover the debt if the business defaults. 

Long-Term Business Loan vs. Short-Term Business Loan

A long-term business loan is often considered preferable to a short-term business loan due to the size of the monthly repayments. With a long-term business loan, monthly repayments are smaller and more manageable alongside other overheads. This can mean less stress on cash flow and therefore less risk to operations.  

There are more factors to take into account than simply the size of the loan repayments, including things like set-up and administration fees or the need for collateral; however, interest rates are usually referred to as the biggest difference between the two. While interest rates may be lower with a long-term business loan, the overall amount of interest paid may be higher due to the longer repayment period. 

Is my business eligible for a long-term business loan? 

Exact eligibility criteria will differ between lenders. At White Oak UK, we offer access to 1 to 4-year term business loans for organisations which: 

• Are registered as a limited company or LLP 
• Can provide a personal guarantee from a UK-based, home-owning director as a minimum security measure
• Have a proven track record as a growing and stable business 
• Can provide the latest, fully filed accounts 
• Can provide management information where the year-end is less than 12 months prior  

Still not sure? You can check your eligibility in just a few moments online, without submitting an application or being subject to a hard credit check. Alternatively, get in touch with us to explore your options, or browse our complete guide to business loan eligibility. 

Advantages of a long-term business loan 

A strategic tool for business growth, long-term business loans offer several advantages, including lower monthly repayments, access to larger loan amounts, and potentially lower interest rates compared to short-term options. 

What is particularly attractive for many businesses is the flexibility in how the funds can be used – you can use the funds for buying new equipment, hiring new employees, marketing, debt consolidation, industry expansion and even the purchase of a new business. That said, some lenders may impose restrictions based on your agreement terms, and so it is best to check with each lender. 

Other advantages include the opportunity to build a good credit rating with manageable monthly repayments, and a diversification of capital sources, reducing reliance on any single source of income. 

A long-term business loan can be a good alternative to investor funding, particularly if you don’t want to dilute your ownership or control of the business.  

How to get a loan for business expansion: Things to consider before taking out a long-term business loan

Securing a long-term business loan might feel overwhelming, but there are four things you can do to simplify the process, strengthen your application and ensure favourable repayment terms. Before applying for a long-term business loan, you should….  

Be in a good financial position – clearing your lesser debts is likely to give you access to larger loan amounts or better repayment terms. It will make you ‘less risky’ in the eyes of the lender and therefore more desirable. 

Build a good credit report. During the application process for a long-term business loan, your company (and its credit score) will come under scrutiny. By taking steps to fix your credit score first, you’ll be in a better position to apply. 

Write a business plan (and know it inside out!) A professional business plan will set you apart from the rest and give lenders a better snapshot of your company vision than your credit score. However, don’t lean solely on the document and ensure that you live and breathe your business. 

Finally, you should also shop around for a deal that works for you. There are lots of options available – gone are the days of traditional bank loans and their lengthy processes, you can now choose between different forms of funding to get fast, flexible finance that suits you.   

What is a business funding 5-year plan? 

A five-year plan for businesses looking to attract investment is typically a business plan specifically mapped out over five years. It will usually include things like an executive summary, information as to the company’s mission, products and target markets, market research, details on personnel structure and projections with a five-year timeline. If the business plan is being designed to attract investors, it will also feature a funding request section with details of the amount desired, how that amount will be used and what ROI any investors can expect. 

You can find out more about business plans, including how to write a good one, in our guide.

Long-term business loans from White Oak UK 

White Oak UK has a reputation for exemplary client care and same-day decisions on business funding. Not only will you be assisted by a knowledgeable advisor who will walk you through the ins and outs, but you also won’t have to wait long for a decision on your application. One of our recent deals for a property management client was proposed, accepted and paid in less than 3 hours. 

Apply for a long-term business loan for fast funding. 

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