Short term vs long term loans: which one is right for you

14 October 2020
reasons to invest in new business equipment

When considering financing options, its necessary to understand the difference between short-term vs long-term loans. Which business loan option is right for your small business?

If you want to improve your cash flow strategy, you must be aware that there are different loan solutions. Every option is significant in different situations. It is important to analyze your needs first and then match short-term or long-term loans to meet your demands.

Difference between short-term vs long-term loans

As we have already said, based on the repayment period, finance options classify into short-term vs long-term loans. What is the real difference between these two loan options?

Long-term loans involve various years of repayment terms and a specific application process. Short-term business loans allow you fast access to capital. In most cases, you can get the money on the same day of the application.

Deciding between short-term and long-term loans can help you to grow your business based on how much money you can borrow and the interest rate of these two different financing options.

Short-term loans

Many small businesses initially tend to choose a short-term business loan because it is considered an easy way to get your money in a short period.

The smaller is the amounts and the shorter the loan term loan, the faster it pays off. This is one of the reasons why, when having consistent revenue, it is easier to get out of debts.

Usually, the financial institution analyzes the loan application considering monthly cash flow and credit history.

The minimum requirement to apply for these Small Business Loan options is:

  • to be in business for a minimum of 3 months,
  • provide bank statements and payment history of the business owner,
  • and outline the business forecast.
Long-term loans

The long-term financing allows your small business to meet your goals in a long-term period. On the other hand, the long-term loan can be riskier than short-term because it needs certain assets as security or collateral.

Besides, it is more difficult to be approved for long-term loans. Your lender wants to know that it is worth at least as much as they are lending out money to you and be sure you can pay the loan back.

A long-term loan is best for small business that is looking for significant investments.

Short or long term loans: which one should you choose?

Deciding between short-term vs. long-term loans depends on your specific business needs.

short-term vs long-term loans options

At Sure Capital, we are specialised in providing loan options for any small business all over Australia. You can choose between short-term or long-term options. The most popular loan options:

  • Unsecured small business loans: fast and easy way to get access to, usually is short term finance to take advantage of an opportunity to grow or expand the business.
  • Short term business loans: used to cover cash flow problems
  • Secured business loans: to get access to this loan you will need to use an asset or property as a collateral

Other types of small business finances are inclusive to:

  • Business line of credit
  • Merchant cash advances
  • Invoice Finance Factoring
  • Equipment financing.

Not sure if your business needs a long or short-term loan?

Find more information on our financing options to get the best loan for you or get in touch with one of our expert consultants and lenders.

Totally free process – ask about our pre-approvals with no credit checks.

If you prefer, call us now at 1300 198 154