Loans from banks for longer than 12 months are referred to as?

Loans from banks for longer than 12 months are classified as long-term debt. This type of debt is characterized by a repayment period that extends beyond the typical one-year mark. Long-term debt is often used by businesses to finance significant capital expenditures, such as purchasing equipment or property, or to cover ongoing operational expenses over an extended time frame.

When a company takes on long-term debt, it usually issues bonds or secures loans that come with fixed or variable interest rates, and these obligations can last anywhere from one year to several decades. By distinguishing long-term debt in this manner, businesses can better manage their capital structure, balancing short-term operational financing needs with long-term growth investments.

In contrast, short-term debt refers to obligations that need to be repaid within a year, current liabilities are those financial obligations due within the accounting period (which is typically a year), and unsecured loans are those not backed by collateral. Understanding these distinctions is crucial for effective financial planning and management.