Advantages of a Mid-Term vs Short Term Business Loan

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Advantages of a Mid-Term vs Short Term Business Loan


Advice on the advantages of a mid-term vs short term business loans — which amount to near $600 billion across 7,000 lenders — can be hard to find. While a search for financing usually means growth, and should, therefore, because, for celebration, it often feels more like plodding through a sea of options, jargon, and aggressive promotional material. This guide will clear the confusion by helping you determine which term loans are right for your business, and laying out all you need to know at each step of the process.

Step 1: Start with the basics

Let’s begin with a working definition. A term loan is a lump sum (the “loan amount”) borrowed from a lender, and paid off at certain intervals, over a set amount of time (or “term”). If you’ve bought a car or a house, you probably have experience with term loans. Like mortgages and car loans, business term loans are among the most common forms of financing available.

Step 2: Know your reasons

Term loans serve specific purposes. Offering lower interest rates than credit cards, they make investments in long-term business growth possible. However, using a term loan to cover a cash shortage when you don’t expect business growth soon, or using one to cover an expense you expect to repay in a few weeks, may drag down, rather than boost your business.

A term loan is perfect for making an investment in an opportunity that will create a steady stream of cash soon.

Common term loan use cases include:

  • Moving into a new office to accommodate an increasing number of employees and clients.
  • Opening a new store, renovating an existing space, or purchasing inventory.
  • Refinancing high-interest debt.
  • Revamping a business website.
  • Hiring new employees.
  • Investing in the new technology, space, and employees to take on new markets.
  • Getting working capital to cover seasonal fluctuations.

Step 3: Understand your options

Now that you know what a term loan is and what purposes it’s best suited for, it’s time to get into the nitty-gritty.


Secured loans are protected by an asset or collateral; the lender holds the title to this asset until all debts are paid. Like credit cards, unsecured loans, involve greater risk for the lender and therefore incur higher costs and shorter repayment terms for the borrower.

Unsecured loans are an appropriate way to get small amounts of fast cash that can be repaid in a matter of weeks or months; secured loans are usually the only way to get large amounts of money for significant investments.


Short term loans are usually an unsecured sum to be repaid within a year in larger, often daily payments. Because these are easier to obtain and have higher interest rates than longer-term loans, it’s imperative that you only seek short-term funding for expenses you will immediately receive the cash flow to pay off.

Intermediate-term loans like BitX Funding run from one to three years and are repaid from a business’ cash flow on a bi-weekly or monthly basis. These loans are perfect for opening a new location, expanding your team, purchasing equipment or inventory, and refinancing debt.

Long-term loans are always collateralized and run from 3 to 10 (or sometimes 20) years. They are most appropriate for undertaking large construction projects and purchasing capital equipment, buildings, or other businesses.

Grow your business with BitX Funding and the Advantages of a Mid-Term vs Short Term Business Loan.



A floating interest rate, also known as a “variable” or “adjustable” rate, changes with the market over time, while a fixed interest rate holds steady throughout the term of the loan. If an increase in market interest rates is imminent, a fixed rate is likely the wiser choice. If market rates are on the decline, however, the loan would cost less overtime with a variable rate.


Some institutions allow you to choose from several repayment plans. Perhaps the most important consideration is whether the plan involves paying off your debt in even amounts (allowing you to budget the cost easily) or increasing amounts (allowing you to pay it off more quickly with less interest).


For loans with interest charged on a compounded basis, the interest from each payment cycle is capitalized, thus raising the principal and consequently the interest charged in the next payment cycle. If you can repay a loan with compound interest early and without fees, you may be able to circumvent the extra interest that would accumulate over time.

Step 4: Assess your qualifications

Every business has a unique story and unique attributes. The rates and terms lenders offer you depend on their assessment of your business according to specific criteria. While the importance ascribed to each of these characteristics depends on the lender, all banks, and financial institutions will consider your character, your business’ capital or cash flow, credit rating, collateral, and business plan.

To qualify for a BitX Funding, for example, your business should be profitable. It should be generating over $200,000 in revenue annually, and it should have more than 2 years of operating history. As the business owner, you must be willing to guarantee the loan and, preferably, have a personal credit score of at least 660, although other factors may favorably outweigh a lower score.

Step 5: Find a lender

Term loans are offered by multiple institutions including large banks, community banks, credit unions, and online lenders like BitX Funding. As a business owner, your primary considerations should be the terms of the loan offered, the time required to get to a decision on your application, and the speed of disbursement of funds.

In the wake of the financial crisis, large banks have been especially hesitant to offer loans smaller than $1 million to businesses that do not meet stringent requirements. While community banks have historically had higher approval rates as compared to their larger counterparts, ongoing consolidation in the industry means that there are fewer such institutions offering to finance. Many small businesses seek loans financed by the government’s Small Business Administration (SBA), but SBA loans require extensive paperwork and frequently take months to be reviewed, approved, and funded.

Recognizing the gap in the market and the burden faced by small business owners, we at BitX Funding have implemented a simple, transparent, and fair process. Our application can be completed in 10 minutes; approval and disbursement occur in less than 7 days.

Step 6: Compare offers

In addition to interest rates, each lender charges fees. Loan fees typically include one or more of the following:

  • Origination fee: As a commission, this is an upfront fee charged by the lender for processing a new loan.
  • Processing fee: This is a catch-all term for the miscellaneous costs of underwriting a loan that lenders sometimes pass on to the borrower.
  • Utilization Fee: A lender bases these annual fees on the amount of credit actually used by a borrower [in instances where the loan is drawn down in smaller advances].
  • Documentation fees. Some banks charge a documentation fee (in the $100-200 range) for filing a loan application.
  • Prepayment or early loan closure fees: Some lenders require premiums based on the percentage of the principal being paid ahead of schedule, especially if the source is refinancing (if allowed).
  • Late fees: These fees are charged when payments are not made on time.
  • Brokers’ fees: It is particularly important for small businesses to be careful if using a broker to acquire a loan.
  • Commitment or “ticking” fees: Some lenders charge this fee, usually a fixed percentage of an undisturbed loan amount, for guaranteeing a loan in the future.
  • Closing fees: These are the costs of the lender’s lien on loan collateral. Most institutional term loans do not require closing fees.

While fees and interest rates are significant, the key to comparing diverse loans is the annual percentage rate or APR. The APR tells you what the loan actually costs each year, taking fees into consideration. While a loan may appear to have a low-interest rate, a high APR gives away the underlying fees and the actual cost of the loan over time.

Armed with everything you need to know about finding and comparing term loans for specific financial needs, you can make decisions about your business’ future with confidence.

Advantages of a Mid-Term vs Short Term Business Loan

Start Up Line of CreditShort Term LoansLong Term LoansBusiness Lines of Credit
BitX Funding start-up financing program connects entrepreneurs and business owners with $25,000 – $150,000+ in unsecured business lines of credit. This program can provide you with funding in as little as 10 days and is typically offered with 0% interest financing for the first 6-18 months.Designed to help meet short-term needs, such as unexpected events, or to take advantage of a great deal. Typically, most small business owners qualify.BitX Funding offers true long-term business loans with automatic monthly payments. If you are looking to Fund larger projects that pay back over a longer term with rates as low as 5.49% this option may be right for you?Business lines of credit allow you to draw funds whenever you need. Funds will be deposited directly into your bank account. Repay via automated weekly debits over six months. Your available balance replenishes as payments clear. Lines of credit can go as high as $100,000 with interest rates averaging around 13%.
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Let Us Help:

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 applying online here and we can guide you on which loan is the best fit for your business.



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