Why Short-Term Loans Are Better Than Longer Term Loans

First off, if you are considering taking out a business loan it's important to weigh all potential factors involved, a few of those being: How much do you need? What rates are you going to have to pay? And what are the terms as far as length of repayment?

With a longer-term loan, you are paying back the money usually over the span of decades. Generally, with these types of loans, there's a lengthy application process and your chances of qualifying are more difficult than they might be with a short term loan.

This is why it's critical to sit down, consider the variables inherent with both short and long term loan programs and then choose which might be better for your company.

Weighing Short and Long Term Loans

Short Term:

• Has a higher interest rate; however, given that a long term loan can last for decades, over the long haul you usually will be paying more in interest.

• Less paperwork; streamlined application process.

• Better chance of qualifying through alternative lending companies; less restrictive criteria where even bad credit now is acceptable in some situations.

• The much faster process start to finish; some can get the money in their account in as little as 24-48 hours.

Long Term:

• Lower rates, but consider the entire duration of repayment—you generally pay more in overall interest.

• The application process involves an inordinate amount of paperwork.

• Tighter lending restrictions associated with this type of loan. Especially when it comes to smaller businesses, banks are becoming more and more reticent about doing longer-term loans.

• The entire process could take weeks, if not months.

First Union has worked with numerous small businesses, and in most cases, the short term loan programs are the better way to go. Not simply because of the ease of application but also because short term loans are becoming increasingly flexible as far as repayment options, the ability to use the cash for whatever you want, and loan amounts. We'd love to discuss our loan programs with you. Call today!