Problems in Raising Long-Term Finance


Short-term financing is typically much less stressful than raising long-term capital. The reasons are simple and straightforward. Whether seeking personal or business financing, short-term issues and conditions are fairly easy to analyze and predict. However, just as it's more difficult to predict the long-term success of a professional sports team or future weather conditions, projecting financial abilities of individuals or companies over time is a challenge--for both borrower and lender.

Future Uncertainties

  • The primary problem in raising long-term financing relates to uncertainties. Walking in the shoes of a lender explains the constant lender concerns in this area. While there are many success stories, Microsoft, IBM, Ford, Google, etc., of small companies reaching incredible success, future successes, for individuals and companies, are difficult and risky to predict. Successful long-term finance depends on successful long-term profits for individuals and organizations.

Rate Risk

  • Both lender and borrower face rate risk with long-term finance. As every borrower and lender knows, predicting short-term interest rates is fairly easy and only marginally risky. However, anticipating long-term rate changes is a formidable challenge, regardless of the "expert" predictions or available data. Problems in raising long-term finance, particularly in a period of rate fluctuation uncertainty, are magnified when dramatic rate risk becomes reality.

Long Repayment Cycles

  • The longer the repayment cycle, the higher the risk to the borrower and lender. This is particularly true when comparing individual to commercial lending. For example, the "market" accepts 30-year (sometimes, even 40-year) repayment cycles while commercial loan terms, even for real estate, seldom exceed 15 to 20 years. Extended repayment cycles pose higher risk to both lenders and borrowers. New businesses pose even potential problems as 80 percent of new businesses fail in the first two years.

Global Economic Influences

  • The global economy, unlike in past decades, influences the availability of long-term finance. As business results are more affected by conditions in Europe and Asia, long-term finance is often influenced on a local level. Long-term issues, with their inherent rate and repayment risk, are further complicated with world-wide economic influences. The Internet and electronic media often mold perceptions of and/or affect investor/customer moods, which, in turn, affect the availability of long-term finance solutions for both individuals and companies.

Competition Considerations

  • Competition always influences long-term finance. Branding and public perception, regardless of local, national or global economic distress, are critical to availability of long-term finance. Lenders, particularly commercial banks, need to maintain strong long-term finance efforts. While local, national or international financial considerations cannot be ignored, lenders must monitor and meet competitive challenges to succeed.

Related Searches


  • Photo Credit Web-shopping image by Mykola Velychko from
Promoted By Zergnet



You May Also Like

  • Sources of Long-Term Finance

    Long-term financing is a tool that companies use to expand operations or to acquire other businesses. Because most companies do not have...

  • How To Raise Small Business Capital

    In order to get your small business up and running, you may need to raise capital. Finding money for your small business...

  • Entrepreneurs & Financial Problems

    Entrepreneurs can face a variety of financial issues that can impact the business's profitability, and even its long-term survival. Some financial problems...

  • What Is Long Term Financing?

    In modern economies, organizations that take the lead in evaluating long-term cash needs often fare better than those that don't. Assessing long-term...

  • Risk Vs. Uncertainty

    When you go to a financial advisor and say you want to make an investment, he may tell you that you are...

  • Long-Term Financing Risks

    Long-term financing usually provides funds at the beginning of a loan term and gives more than three years to repay the full...

  • Problems in Financial Management

    Understanding financial-management problems requires analytical dexterity and strategic vision. All organizations, regardless of size, put procedures into place that enable personnel to...

  • Common Financial Problems

    Financial problems are normal, day-to-day issues with long-term ramifications. Debt and other major issues are severe enough that experiencing difficult finances is...

  • Financial Problems of Athletes

    You're probably used to hearing about professional athletes scoring multimillion-dollar contracts, but you might not be aware that many of them wind...

  • What Problems Are Faced by Insurance Companies?

    Factors in the economy, risk management, keeping costs low and retaining business in a competitive market are issues insurance companies face on...

Related Searches

Check It Out

Are You Really Getting A Deal From Discount Stores?

Is DIY in your DNA? Become part of our maker community.
Submit Your Work!