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.

Short Term Commercial Loans


Short term commercial loans are given, upon application by financial institutions to both small and blue chip corporate entities to finance its short term operations like expenditures. Also where there is an emergency on financial or a crisis that needs money as soon as possible to sort out the issue. These short term loans come in hand because they become a great solution in terms of finance to those corporate or organization who are faced with hindrances of covering expenses which emerge to be of urgency. Traditionally, debt financing only occurred with loans that would take a period of 5 years or more to be able to repay it back. However with these emergencies, the short term commercial loans have made it easier for business entities to finance their operations.

Short term commercial loans have strict terms before a financial lending institution approves your loan request. In some cases the lender request to look at the company’s books to ascertain it credit worthiness before granting the loan request. The time limits for short term loans are strict and may range from a few months to one year. The borrower stipulates what the intended purpose for requesting the loan and when it is likely to be financed with the specified interest rate.

Many reputable lending institutions provide these loans by physically going to the banking premises or by doing it online where one has a busy schedule upon filling the requisite forms. Advisably, it is important to visit the bank and talk to the guys at the credit section to find out the packages they have, the interest rate chargeable and the repayment period that works with the period that you are able to service the loan.

It is advisable for one who intends to seek a loan to know and fully understand the pros and cons of short term commercial loans before proceeding to apply because one big disadvantage of applying these loans is that they are much more expensive by reducing profit margins due to the high interest rates than long term commercial loans and if one is not careful enough they will end up worsening their financial situation and even will put one in the bad side of the lenders because maybe the borrower might have delayed paying up all the money plus interest as agreed hence defaulter as rarely do loan lenders desire to work with culprits of defaulting and even one can be put out of business.