Long-term or Short-term Loan – Which is More suitable?


Small business enterprises covet both short as well as long term loans. A lot depends on necessity and specific requirements of businesses. In the case of organizations looking for elongated term repayment periods, the long term loan is ideal. For enterprises that look for a repayment guarantee not exceeding a few years, short term loan is the best choice.

Long term or Short term Loan

Long term or Short term Loan

Enterprises need to detail out their specific requirements such as the amount required, interest they can pay, and working capital needed to cover up temporary capital requirements. This should be done to assess and find out what sort of grant should be borrowed. If the business is in the need of large capital and can pay high interest then obviously it can opt for the short term loan support. However, if the organization is in a position to pay back slowly then one should opt for long term small business loans.

However, time of borrowing business loans also matter. For example, in a normal economy, interest for short term advances is higher compared to a ‘recession economy’ when the interest rate is quite low. So, every factor should be taken into consideration while deciding the loan type. Borrowers should be keen to borrow only those loans that they can return along with the interest. It is necessary to pay back borrowed advances in time otherwise lenders will charge extra interest for the grant. So, it is while borrowing that business owners should assess how much grants they can deal with. Based on such an assessment, applications should be filed.

There are also other aspects. A short term grant is considered more risky by financers than the long term fund. So, anyone applying for the long term support need to give reasonable assurances such as a good collateral and fixed income details. It is the duty of the borrower to convince lenders and to make them feel that they are on the safe side. That awarding grants to the company won’t put them to any risk. When reliable commitments are made, the lender would like to give any kind of loans – whether extended or short-term to a business owner.

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