Long-Term Business Loans in Canada Explained

If you want your business to grow, whether by opening a second location, investing in technology, or purchasing new supplies, you need capital. To secure this capital, many companies in Canada choose long-term business loans, but what are they? 

In today’s blog, the team at Bizfund shares what you need to know about long-term business loans. We understand that, for many businesses, there comes a time when retained earnings are no longer sufficient, so we want to share more about your business growth funding options. 

From banks and credit unions to development organisations like BDC Canada and alternative financing solutions like Bizfund, there are many choices for funding to support your business. Let’s dive into where to look, how to apply, and whether short-term or long-term loans are the better choice for your situation. 

What Are Long-Term Loans?

So what exactly are long-term business loans? To put it simply, these loans can be thought of as financing facilities. You’ll gain access to this facility and a predetermined amount of funds and then have a specified repayment period. For example, you may receive $50,000 and have up to three years to repay it, plus interest and principal. 

However, it’s also essential to note that, in many cases, you can extend the usual three-year period to five, seven, or even ten years, depending on the circumstances. But… and there is a but, you’ll end up paying far more interest than you anticipated. With this in mind, you will decide on the loan term structure that best suits your repayment needs and benefits the business. 

Unlike short-term loans, which have shorter repayment schedules, long-term loans are usually better suited to larger or more strategic business objectives. We’re not telling you what you can and cannot do with the working capital you secure. But long-term loans are ideal for facility upgrades, acquisitions, equipment purchases, and broader growth plans. 

The Types of Long-Term Business Loans

If you’re considering a long-term loan and don’t know where to look, here’s a quick guide on where to start your financing journey: 

• Traditional bank term loans: These are offered by major Canadian credit unions and banks. You can usually secure funding for expansion and equipment or refinancing.
• Canada Small Business Financing Program (CSBFP) loans: CSBFP loans are government-backed but offered to the public through participating credit unions and banks. However, they can be harder to get for a small business.
• BDC term loans: These loans offer you access to funding that you can use for asset purchase financing or long-term growth.
• Commercial mortgages: You can apply for a commercial mortgage at a credit union, bank, or mortgage lender to purchase or refinance business property.
• Equipment financing and leasing: If you need only equipment financing for your business, consider these options. These loans are specialized and available at vendor financing companies, banks, and independent leasing firms.
• Franchise and practice loans: These loans are provided by specialty lenders, banks, and some banks. They are meant for startups and expansions.
• Green and sustainability loans: If you need to fund energy efficiency or sustainable modernization projects, you can consider green and sustainability loans. Usually, banks and Crown corporations offer these long-term loans.
• Merchant cash advances: Merchant cash advances can be short or long-term loan solutions, depending on whether you choose a longer repayment term. These are available from alternative financiers such as Bizfund. Your repayments are linked to future sales rather than to installments, and eligibility is less strict.

Benefits of Long-Term Business Loans

Now that you know what long-term business loans are in Canada and where you can apply for one, you’re likely eager to learn more about the benefits. Below, our team shares the top benefits of these loan types that might convince you to take the leap: 

Alignment With Long-Term Investments

If there is one thing you need to do, it’s to ensure your loans align with your long-term investments and your company’s health. The unfortunate truth is that for many Canadian businesses, investments don’t produce full returns immediately. 

For instance, if you open a new facility, it could take time to reach capacity. Likewise, a major equipment purchase will likely improve your business productivity, but only gradually. That’s why your long-term loan should fit the same timeline as your business benefit to keep financing aligned with reality. 

More Predictable Cash Flow

One of the biggest benefits of long-term business loans is that you experience a more predictable cash flow.  This is because longer repayment periods generally result in lower monthly installments than short-term borrowing. 

This gives your business the flexibility to fund payroll, operations, inventory, and marketing while still maintaining routine loan payments. Not to mention, predictable cash flow also helps with financial planning and budgeting. 

Support For Credit Building

Credit building can be incredibly challenging, especially for businesses. Fortunately, another benefit of long-term business loans is that you can demonstrate consistent repayment behavior over time. This can gradually strengthen your business’s credit profile and make you more attractive to lenders if you need future capital for growth.

How to Apply for a Long-Term Loan

Applying for a long-term business loan can be tricky if you’re unsure what to do. That’s why we share a few simple steps to outline the best way forward if you need to secure the bag for your business to continue doing what it does best…make money and a positive impact: 

1. Step One: You need to organize your business’s financials. Usually, to do this, you need to gather recent balance sheets, income statements, and tax returns. This allows lenders to review your current business performance.
2. Step Two: To show how your business expects to meet loan repayments and perform in the future, you’ll have to prepare cash flow forecasts. These will show your realistic revenue and expense assumptions.
3. Step Three: You’ll need to show ownership and business structure documentation. This means you’ll have to gather shareholder information, registration details, and corporate records. With this documentation, lenders understand who operates the company.
4. Step Four: Put together a business or expansion plan. This will involve explaining how you will use the funds, why your business projections make sense, and how the funds will support long-term growth.
5. Step Five: Gather your business’s supporting contracts and quotes. This will involve attaching purchase agreements, estimates, and project documentation to your long-term loan application. This is important if the loan will fund renovations, equipment, or acquisitions.
6. Step Six: Look over your company’s credit history and security requirements. You’ll need to be prepared to discuss your business or personal credit, along with any collateral and guarantees you may need to provide to secure the loan.
7. Step Seven: Meet with the lender and discuss the long-term loan terms. This usually involves asking questions, reviewing repayment schedules, and ensuring the loan structure fits your cash flow needs. They will then assess your eligibility.

Comparing Short-Term Loans With Long-Term Loans

When you need financing, you’re likely looking into short-term and long-term business loans in Canada. Although both can be beneficial, they differ. Below is a comparison of each to help you make a better decision regarding which meets your needs:

Short-Term Business Loans Typically:

• Have repayment periods measured in months rather than years.
• Work well for immediate working capital needs.
• Support inventory purchases, payroll timing, or seasonal gaps.
• Prioritise quick approvals and flexible access to funds.
• Carry repayment structures that move faster with revenue cycles.

Long-Term Business Loans Typically:

• Extend your business repayments over several years.
• Support larger or strategic investments that take time to pay off.
• Fund equipment, expansions, renovations, or acquisitions.
• Offer improved repayment schedules to support planning and budgeting.
• Align borrowing with the useful life of business assets.

Long-Term Business Loans: The Key Takeaways

When it comes to long-term business loans, you have quite a few options in Canada. However, you need to ensure you’re choosing the right type of loan and understand the differences between short- and long-term loans. This will help you fully determine which best suits your needs. 

If you are leaning toward a long-term loan, the benefits should have given you insight into why it may be a good choice. With this in mind, if you’re ready to explore, you can have a look at our merchant cash advance loans at Bizfund. 
We offer convenient MCAs and don’t solely rely on your credit profile to assess eligibility. We also provide between $10,000 and $300,000 that you can use as you need, with longer repayment terms available if necessary. So contact us here today to take another step closer to achieving the business growth you desire.