Is a Long Term or Short Term Loan Best for Your Company
As a payroll funding company with plenty of experience in helping start-ups, we’ve found that one of the most common concerns of small businesses is where they should get their funds from. Both short term and long term payroll loans have their pros and cons, and this article is aimed at shining a little light on the intricacies of both so that businesses can make better informed decisions.
In terms of convenience, there’s no doubt that short term loans are far easier to acquire. Of course, this ease is coupled with a much higher interest rate than a traditional long term loan. This makes short term loans incredibly risky for start-ups that are building their initial capital, but it should be a perfect fit for established businesses that just need a quick injection of cash to take advantage of trends in the marketplace or a supplier’s discount. Just as with our payroll funding and financing service, short term loans exist for when you specifically need them the most.
In general, long term loans aren’t really necessary for small businesses due to their size. If not considered carefully, a long term loan can tackle on too much debt to a company and it can be difficult to overcome. By contrast, a short term loan may have a higher interest rate, but they also typically have a smaller principle that can be paid off quicker.
Banks and other institutions aren’t as willing to finance new businesses as short term lenders are. This means that, depending on how established your business already is, a short term loan may be your only option. Long term loans often require months of consideration and paperwork before a
decision is reached, and it can be even more difficult for loans from government agencies. Conversely, small business loans are typically lent out within a few days and give business owners more time to make informed decisions.
Which is Right for Me?
These three factors are perhaps the most important in determining which loan type is right for you and your business. If you’re a small start-up that needs to quickly build up its assets, then a short term loan should be the right fit. By contrast, if you’re a larger business that can afford to go through a long term loan’s hurdles, then that may be for you. Give Flexible Fund a call and let us help you navigate the pitfalls of payroll loans.