Long terms loans- Its benefits and limitations

business-loan-provider-250x250Often we meet with prospective entrepreneurs having an incubator of unique business ideas, but could not manage to start their venture for lack of fund. Also we meet with the owners of tiny and medium scale business who have tremendous growth potential but fail to materialize the same as they have a crunch on the financial resources. In both the cases, it is the monitory factor that is acting as a constraint to the growth of potentials and even till recent past they had been cases wherein all the hopes were lost, regretting upon the lack of financial strength.

Benefits that long term loans offers

These days, with the gradual numbering of lenders and the modernization of financial activities, we see the emergence of the concept of long term loans that is acting as an effective solution to the problems as stated at the onset of this article. The financial institutions encourage the enquiry and application to avail long term loans from prospective business minds. The lenders provide fund to these parties on long repayment tenure usually of fifteen to thirty years that the entrepreneurs can effectively utilize as their fixed capital requirement to start their ventures or to expand their business. The fund is lent out moderately fast and on lower interest rates. All these factors clubbing with the long repayment tenure that it offers enables the borrower to utilize the fund without taking much pressure of the monthly installments of repayment and the borrowers, the business people, gets the chance to concentrate with full mind upon the core areas of their business.

Its limitations

Mostly, prior to approve the loan application the lender may ask the borrower to pledge the security of assets against it. Now, in case a person does not have pledge bale assets to his name, he will not get the facility of taking long term loans.



How to overcome the challenges of financial crunch

Long term loans – get the capital you need

Long term loans can be the best of option in case an individual is in need of fund to start his venture or he wants to scale up the activities of an existing business setup. The utilization of the fund that had been borrowed as long term loans, in the cases of business applicants, lies in the areas where in there is requirement of long term investments. Normally, the business houses accomplish activities like construction of office and factories, installation of expensive tools and machineries, up gradation of production process and similar others that they categories under long term capital financing. To get a financing of this type, the applicant needs to place his application accompanied with certain documents of credential. They checks and verify the authenticity of these documents and grades the applicant either as to be a high risk prone or a medium or low risk prone case and accordingly they fix the rate of lending on case to case basis. Also, a copy with detailed project planning that is intended to be executed with fund, is to be submitted to the lender for his perusal. The possibility of getting the approval on the application is determined by the standing of the financial and repayment capabilities of the applicant, along with the feasibility of his project plans. Normally, prior to approve the loan application, the borrower needs to pledge any asset with the lender as security of debt and subsequently the lender retain the rights to liquidate the asset as collateral damage in case the debtor fails to repay. This might act as a constraint for an applicant who might not have any pledge able assets to his name.

Reasons behind the growing popularity of long term loans

 The lenders encourages prospective businessmen to avail the same to arrange for the fixed capital requirements of his business
 Loans are approved moderately fast
 Lower interest rates on the loan
 Long repayment tenure
The fund derived from availing long term loans, therefore, can be considered to be a lifeline to the business units as often we see business units, irrespective of having good future prospects and potentials, fails to accomplish their vision and mission. The worries of non availability of financial resources are now meant to be sleep over in case an individual has meticulous planning and he is ready to undertake laborious executions of the planning.



Long term Loans as a source of the fund one needs

Understanding the concept of Long term financing

The long term loans are the ones that are lent out with long repayment tenure, varying between fifteen to thirty years. The banks and financial institutions as the lender, lend s the fund to the individual and business applicants alike. To get a long of this type, one needs to place his application accompanied with certain documents of credential. They checks and verify the authenticity of these documents and grades the applicant either as to be a high risk prone or a medium or low risk prone case and accordingly they fix the rate of lending on case to case basis. Also, a copy with detailed project planning that is intended to be executed with fund, is to be submitted to the lender for his perusal. The possibility of getting the approval on the application is determined by the standing of the financial and repayment capabilities of the applicant, along with the feasibility of his project plans. Normally, prior to approve the loan application, the borrower needs to pledge any asset with the lender as security of debt and subsequently the lender retain the rights to liquidate the asset as collateral damage in case the debtor fails to repay.

Long term Loans- a source of fixed capital

The utilization of the fund that had been borrowed as long term loans, in the cases of business applicants, lies in the areas where in there is requirement of long term investments. Normally, the business houses accomplish activities like construction of office and factories, installation of expensive tools and machineries, up gradation of production process and similar others that they categories under long term capital financing. Coming to the perspective of individual applicants, loans for construction of residential buildings or its remodeling happens to be the most popular cases of long term loans. Thus, it can be said that with both the types of applicants, loans on long term are taken to be subsequently invested upon the procurement of fixed assets. Since the lending of long term loans comes with the pledging of assets against its security, the lender usually approves the loan at lower rate of interest and they always encourage the business unit to avail this loan to make the provisions of their fixed capital requirements.

Thus, it becomes visible that long term loans can be the best of option in case the applicant is in need of fund to start his venture or he wants to scale up the activities of an existing business setup.



An overview to the idea of long term loans

The needs behind taking a loan and its outcome

The unpredictable nature of money often drags an individual towards a situation of crunch wherein the concerned party is left with no other option to manage alternate sources of fund to overcome the situation. It is normally in these situations in which one starts his scout to find a loan that had been a source of fund to people. As we know, the process of lending and borrowing involves the participation of two parties- the lender, who lends out the fund and the borrower, who takes the debt. Now, this process ideally happens to be a win-win situation for both of these parties as it provides the required fund to the borrower, upon which he gets committed to pay some extra margin of money as interest that acts as a source of income to the lender. Also, the society in large gets benefited from such a transaction as the debtor normally uses the fund towards any development activity and the income that the lender generates out of a lending , enables him to lend out fund to more and more people subsequently.

A glimpse to the concept of long term loans

The loan scheme may be designed in multiple ways, all of which are specific to the requirements of the borrower as it is some particular objectives being set in the mind of the borrower that he tries to accomplish with the fund. The banks, financial institutions, benevolent trust etc happens to be the lender and the borrowers get casted with the individuals and business units alike. Normally, we can see three types of loan, as per its tenure of repayment that is available in the market, which can be either a short, medium or long term loans. This article is meant to discuss few of the aspects of loans that offer long term of repayment.

Advantages of availing such loans

AS the name do suggest, the long term loans are the ones that are lent out with long repayment tenure, usually over fifteen years that might stretch up to thirty years in few cases. Both the individuals and business units might apply for such a financing depending upon the nature of the plan it is to be executed. The process runs in the way that the prospective applicant needs to place his application to the lenders, mostly the banks and financial corporations. The application has to accompany specific documentation of credentials and a synopsis of the planning that is to be accomplished with the fund. The lender then runs a through verification on the documents furnished and also they access the feasibility of the projects, the plan for which had been proposed by the applicant. Based on its observation, they lender grades the eligible applicants into either a high, medium and low risk entity and accordingly he rate of interest in levied on direct proportion basis. As this fund shall be provided to the borrower for a longer span of time, in which the financial and repayment capabilities of borrower might retard drastically, the ensure the security on the debt, the lenders while lending a fund as long term loans, asks the borrower to pledge any valuable asset against its security, that they can liquidate as collateral damage in case the borrower fails to pay off the debt.