Short-term Commercial Loans vs. Long-term Commercial Loans

 

 

Short-term loans have terms within one year. In some instances, commercial loans with terms of less than 5 years may be considered short-term. These loans can sometimes be considered an expense rather than debt, having a significant impact on the income statement and the balance sheet. Generally short-term loans are for less money than long-term loans.

 

 

 

If you are dealing a relatively small project that can be completed quickly, such as buying a piece of equipment or making small repairs, then a short term loan may be the best solution. It can be paid off relatively quickly and the financing doesn’t outlive the usefulness of the project. If you are doing a larger scale repair job, expansion, or equipment replacement, a long-term loan may be the way to go.

 

 

Beware that often short-term commercial loan rates are higher than long-term rates. Pay attention and shop around with various commercial loan lenders to be certain you are getting the best terms and rates for your specific needs.