Short-term vs. Long-term Business Loans

Short-term vs. Long-term Business Loans

As a business owner, you may be considering a short term or long-term loan to cover extra expenses or a shortfall in cash. Here we highlight the differences between the two so that you can make an informed decision about the financial future of your company. A short-term business loan offers companies a fast solution that can be paid over a short period, while long-term loans are preferred for companies with larger expenses. Whether you are looking for working capital, short term loans for SME businesses, a merchant cash advance or long-term loans, how much money you plan to borrow is ultimately the most important factor to take into account as a business owner. That being said, other components should be considered, including term length.

Short-term loans

For most business owners, short-term loans are the best option. These types of loans provide fast and flexible cash in a time of need, and can sometimes be approved and funds made available in as few as 24 hours. With so many lending options available for business owners, it is easier than ever to skip the restrictive terms and requirements of traditional banks and obtain money from alternative lenders. Short-term loans are essentially easier to obtain and a convenient way for business owners to get cash to overcome financial hurdles.

Long-term loans

Long-term loans may be necessary for some businesses. As the name suggests, these loans are repaid over a longer term that can sometimes last for decades. While short-term loans typically carry a higher interest rate, business owners will end up paying more in interest for a long-term loan because of the length of the repayment term. It is also more difficult for a business owner to obtain a long-term loan because you have to go through various channels and contend with the very strict qualifying standards of traditional banks. That being said, there are alternative lending solutions available that are more lenient in their terms and conditions.

Which is best?

Ultimately, the best type of funding depends on your specific needs. For many small business owners, short-term loans are usually the best way to go, although, in some cases, longer term funding may be necessary. Regardless of your reasons, it is important to work with a financial advisor who can tailor your loan to support your financial obligations.