Comparing Long-term and Short-term Commercial Loans

Where commercial business loans are concerned, there are quite a number of options that one can explore. The terms and interest rates that are charged on these loans vary from one lender to the next. The short-term commercial loan will work very well for any person who is looking to fund a small project but there are also the long-term loans that can be used for much bigger projects and issues.

Typically the short term loan will come with a term of between one and five years. The long term loan son the other hand come with a much longer term of more than five years. Generally, the amount of money given for short term loans is much less compared to that given for long term loans. A large number of businessmen actually consider the short term loan to be an expense as opposed to being a form of financing. This is because of the impact that it usually has on the balance sheet and the income statement.

At this point you might be asking which one would work best for you. The choice that you make should depend on the purpose for which you intend to use the loan. In the event that you are looking to take care of a small project that can be completed within a short time period such as doing repairs here and there or buying certain equipment, it would be good for you to take the short term loan. Larger projects such as the replacement of equipment, expansion of business or a large scale repair job would typically require long term loans.

One p[point to note though is that the interest rates that are charged on the short-term commercial loan are normally much higher compared to those that are charged on the long term loan. This is mostly due to the fact that the short term loan requires to be paid back in a shorter time period. While looking to get this loan, ensure that you walk around and talk to various lenders before settling on a particular one. Make careful comparisons of the terms that you are being given and the interest rates that you are being charged.

After all is said and done, it is important that you take a loan that will match your needs at the specific time. You do not want to take a long term loan to purchase a machine with a short shelf life. You will find yourself still paying for the machine long after the shelf life of the machine is over.