Write short note on long term loans.
Answers
Explanation:
A long term loan is a form of debt paid off over an extended period of time exceeding one year. Obtaining a long-term loan provides a business with working capital that can be used to buy assets, inventory or equipment that can then be used to generate additional business income.
A long term loan has many benefits -
- Money is a limited resource and restricting the supply of money for other assets by spending large amounts in any property or venture. Long-term investments reduce funding time savings and lenders may gain potential earnings faster to help offset costs.
- Long-term loans offer an opportunity to fund new acquisitions while retaining the firm's leverage.
- Long-term loan, given unforeseen events, have a very organized payment process designed to meet the borrower's ability to pay. Consequently, making regular payments on a long-term loan would allow a person or company to develop their credit worth.