Long-term debt financing

In the context of business loans, a long-term loan is a loan that will be paid back over a period longer than a year. Long-term loans are normally secured, first, by the new asset(s) purchased, then by other unencumbered physical assets of the business or, failing that, from additional funds from shareholders or personal guarantees from the principals. The percentage interest rate normally remains constant for the term of the loan. Each payment of principal reduces the balance of principal remaining and the subsequent interest is calculated on this reducing balance.