Posted by & filed under Short Term Business Loan.

Short Term vs. Long Term

Understand short and long term loans for small businesses.
These loan types serve 2 separate needs.
Which is right for you?

 Short TermLong Term
Process DifficultyEasy
- (less to verify)
Not as Easy
- (more to verify)
Closing Speed
- (less to verify)
Not as Fast
- (more to verify)
Payback Schedule
More Frequently
- (many short loans can be weekly)
Less Frequently
- (usually every month)
Interest Rates
- (higher risk to loaner)
- (lower risk to loaner)
Approval ChancesGood Change of Approval
- (less to verify)
Slightly Harder to Get Approved
- (more to verify)
Which to Choose?Choose a short term loan if you're in a crunch, and if getting approved and quick access to funds are priority.Choose a long term loan if you are more stable, want the best inters rate and are confident if your credit.
Apply for a Short Term LoanApply for a Long Term Loan

What Are the Pros and Cons of Applying for Short-Term Business Loans?


Advantage: You Should Receive Your Loan Quickly

The most obvious benefit of a short-term business loan is that it can provide you with fast capital for your operations. In addition, a short-term business loan application is typically shorter than that of a traditional bank loan and requires less information. This can be incredibly useful if your business has expenses that are due in the immediate future, and you cannot afford to wait on a long approval process.

Disadvantage: These Loans Come with High-Interest Rates

Since the application process is much more lenient than alternatives, most short-term business loans have comparatively high-interest rates. When compared to loans that are more exclusive or have longer terms, you will usually end up paying significantly more in exchange for the same loan amount.

The best way to minimize the total cost of securing additional working capital is to repay your loan as quickly as possible. This can be especially crucial if your financial institution provides an early repayment discount.

Advantage: The Application Process is Simple

As we previously mentioned, the application process for a short-term business loan is fast. In addition, it will likely be easy to complete. These loans require relatively little paperwork and the applications can usually be completed online.

Disadvantage: You Will Have to Make Frequent Payments

A notable drawback of applying for a short-term business loan is the fact that most of these loans require very frequent payments. Many of these loans require weekly, or even daily, payments. If your business does not have a consistent revenue source, you should consider other loan options that might offer monthly payments or another type of flexible schedule.

Advantage: Easy to Qualify for

When compared to more traditional business financing options, most short-term business loans have remarkably high approval ratings. Even if your business has a limited or poor credit history, you are still highly likely to qualify for a short-term loan. The lender will still most likely want to review both your personal credit and business credit scores, but their requirements probably will not be as stringent.

Disadvantage: There is the Potential for Significant Debt

It is important to note that regardless of your financing product (whether it be a loan, line of credit, or credit cards, to name a few examples), acquiring any sort of business debt is inherently risky. Generally, you should only apply for a loan if you believe you can repay your debt in full and on time. Otherwise, your business risks getting caught in a “cycle” of debt payments, which could be hard on your bank account and in turn jeopardize your business’s future.

Is a Short-Term Business Loan Right for Me?

Short-term loans can be a beneficial way to finance your business, but that does not mean these loans do not have drawbacks.

Before making any decisions, your business should consider all available options. If you can qualify for a lower-interest loan, and your need for capital is not time-sensitive, then a short-term loan may not be the most suitable option. In addition, if even after securing capital your business will continue to experience cash flow gaps, you should not count on a short-term loan to completely resolve your current financial problems.

However, despite these risks, short-term loans can be helpful to your business. If your business has relatively quick cash flow cycles, a reliable method for repaying your debts, and a strong potential to benefit from an immediate capital infusion, then a short-term business loan might be right for you. Whether it makes sense to apply for this loan type will depend on the specific conditions and characteristics of your business.

BitX Funding is the online marketplace for small business owners looking to fund a project. We specialize in connecting small business owners with lenders who will compete for your business. We believe small business owners drive the economy and we are passionate about helping your company reach its full potential.

You can reach a loan specialist by toll-free at 1-800-824-2407, or email at or apply online here and we can guide you on which loans are the best fit for your business.



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