Which financing method involves borrowing that must be paid back over a period longer than five years?

The financing method that involves borrowing that must be paid back over a period longer than five years is a long-term loan. Long-term loans are specifically designed for substantial capital needs, such as purchasing property, equipment, or funding large-scale projects. They typically have repayment periods that extend beyond five years, allowing businesses to spread the cost of significant investments over a more manageable timeline.

This method provides the borrower with lower monthly payments compared to short-term loans, which may require repayment within a year or less, or medium-term loans, which usually have repayment periods ranging from one to five years. Operational loans are generally intended for covering day-to-day operating expenses and tend to have shorter repayment timelines as well. Thus, long-term loans serve a distinct purpose and are suited to financing larger investments, enabling companies to grow and expand without the immediate burden of full repayment.