When you need a business loan, one of the biggest decisions is whether to opt for long-term or short-term finance. Each option has its advantages and drawbacks – so how should you decide? First of all, let’s look at the possibilities open to you.
All about long-term loans
Usually provided by traditional lenders such as banks, long-term loans are intended to meet strategic needs such as acquiring other businesses or gearing up for growth. The repayment term can be anything from a couple of years to a couple of decades, and the loan may require some security or involve restrictions on the borrowing you can take out in the future.
The basics of short-term loans
In contrast, short-term loans are designed to exploit an unexpected opportunity or alleviate a sudden cash flow crisis. These types of loans are commonly offered by alternative lenders such as Cashsolv, and tend to involve less paperwork, a more streamlined application process and less onerous conditions. As their name suggests, they are intended to be repaid quickly and are not suitable for strategic borrowing or longer-term investment.
The pros and cons of long and short-term business loans
So what are the pros and cons of each option?
Long-term loans are an excellent way of securing the finance you need to transform your business, and the lengthy repayment schedule means that your monthly payments will be comparatively low. On the downside, the approval process tends to be slow and rigorous, and chances are your bank will want to see lots of paperwork – articles of incorporation, balance sheets, profit and loss accounts, tax returns and more. In addition, you may need to secure the loan or have substantial cash on hand to invest in your business plan, and long-term you could end up paying substantial interest even if the rate is low.
With a short-term loan, you’ll be able to obtain a quick decision – opt for a Cashsolv emergency loan and we can have the funds inside your account within 24 hours. However, short-term loans aren’t designed to fund major projects, so you may not be able to borrow all the money you need.
The decision has to be yours
The type of funding that will work best for you will depend on your business and its specific needs. Our business finance specialists will work with you to identify exactly what you need and how we can best help you – whether it’s asset-based finance, an emergency loan, or invoice factoring or discounting (which allows you borrow up to 85% of the value of your invoices as soon as you issue them). If we don’t have the right solution for you, we’ll be able to recommend a lender that does.
To learn more about the finance we offer and talk to a small business expert, please visit our short term business loan page.