top of page

Which is a better deal, long term or short term financing?

Long-term and short-term financing can be both beneficial according to how they suit your different business needs. Companies usually use short-term, asset-based financing when they’re just starting out, this type of financing is generally used more for working capital. When a company expands or starts to gain a track record, they may access either cash-flow or asset-based, long-term financing, which has a lot of strategic benefits. What's the Difference Between Long-Term and Short-Term Loans?

If you research small business loans, you might discover a few financing options that you didn’t even know existed. You may find at least one familiar phrase: term loans.

Term loans are an amount of cash that a lender credits right into an approved borrower’s business bank account. Borrowers will pay that amount, plus interest, over a predetermined period of time.

You might not know that there are different types of terms. These are long-term and short-term loans. Long-term and short-term loans differ based on the extent of their terms, obviously, but there are a lot of less noticeable differences among them as well: The eligibility requirements, loan amounts, and interest rates can differ definitely, too.

Although one may seem more enticing than the other, in reality, the type of loan you’re dreaming about might not be suitable for your business at the moment. You’re possibly hoping for a high-capital, low-interest, long-term loan, but a short-term loan might be the more inexpensive, more available, or merely the more appropriate form of funding for your business especially if you’re a start-up. It does need a few years’ worth of profitability and general financial stability that gives lesser risk, long-term lenders need to see from their borrowers. Alternatively, maybe you do have the qualifications for a long-term loan. Either way, your choice will result in your bottom line. With Sals Capital, you can get both types of loans at the same time.