The Benefits of Long-Term Debt for Your Small Business

For many consumers, the word “debt” causes anxiety. Being “in debt” is usually seen as a negative where being “out of debt” is an accomplishment to be celebrated.

For small business owners however, long-term debt can definitely be a positive and can fuel financial growth.

What is Long-term Debt?

Long-term debt consists of loans and other financial obligations lasting over one year. Long-term debt for a company would include any financing or leasing obligations that are to come due in a greater than 12-month period. Terms of long-term debt can stretch to 20 or 30 years depending on the individual lender and use of funds. Long terms have another advantage: low monthly payments. For example, the payment for a $100,000 low-cost SBA loan from SmartBiz is only $1,123 per month.

Build Business Credit

The SBA sites inability to obtain funding as a leading cause of small business failure. Having excellent business credit is crucial to obtain long-term debt funding with low rates. If you have obtained long-term debt financing, you increase the likelihood of qualifying for additional funds. A SmartBiz 10-year term SBA-guaranteed loan can help your business build credit. As an added benefit, when you build your company's credit, you reduce the need to rely on your personal credit.

Long-term Debt Fuels Growth

SmartBiz offers low-cost SBA loans with long terms. Small business owners who work with SmartBiz disclose how the funds will be used during the application process. Some growth-building uses of long-term debt include buying inventory or equipment, hiring new workers, increasing marketing and more.

Long-term Debt Can Save A Small Business Money

Often, small business owners rely on expensive debt – like credit cards with sky-high rates or cash advances – to get their business off the ground. Unfortunately, this type of debt cuts into cash flow and can hinder day-to-day operations. SBA loans can be used to help small business owners refinance existing high cost debt. Once SmartBiz customer is saving over $15,000 as the result of refinancing and paying off high cost, short term debt.

Long-term Debt Can Eliminate Reliance on Expensive Debt

There are lenders who use aggressive sales tactics to get businesses to take out short-term cash advances. Some businesses in need of funds will take five or six cash advances in a row. Some of these loans can trap a borrower into a debt cycle with no end in site. Instead, look to get an SBA loan. SBA loans have low interest rates, long terms, and low monthly payments. Many have no prepayment penalties. SBA loans can be used to help small business owners refinance existing high cost debt if you’re caught in trap.