The repayment schedule of your financing has a major impact on its benefits. If it’s too short, you can find yourself struggling to make timely payments, whereas you might pay more interest than you have to if the terms are too long.

Don’t worry – we’re here to break down short-term loans vs long-term loans, so you can make the right decision for the future of your business.

Some might think that the only difference between short-term loans and long-term loans is the repayment schedule, but there are a few smaller details that can make one option more beneficial than the other.

Here’s everything you need to know about short-term loans, long-term financing, and choosing which option is best for your business and goals.

What Is a Short-Term Business Loan?

Short-term financing describes loans with repayment periods of less than 18 months. They’re used for opportunities that drive short-term revenue and challenges that you need to handle promptly.

The shortened repayment schedule reduces funding amounts and raises interest rates, although most borrowers pay more interest through long-term financing. Borrowers also have to handle more frequent payments – You can expect daily or weekly payments unless there’s a reason monthly payments would make sense for your business.

What Is a Long-Term Business Loan?

A long-term business loan has an extended repayment period – 2 to 25 years – and higher funding amounts. Businesses leverage this type of financing for multi-year projects, significant investments, or to purchase assets with prolonged lifetimes, such as major equipment.

Interest rates are technically lower than short-term financing, but borrowers still end up paying more interest because of the prolonged repayment schedule. However, the repayment schedule is lighter on your cash flow, as most long-term financing agreements come with monthly payments.

Difference Between Short Term and Long Term Business Loans

Let’s explore the difference between short-term loans and long-term loans.

Short-Term Business Loans Long-Term Business Loans
Repayment <18 months 2+ years
Payment Schedule Daily or weekly Monthly
Funding Amount Generally lower Generally higher
Interest Rates (On Average) Higher Lower
Loan Approval Process Relatively quick and easy Can be more difficult
Collateral? Not always necessary Most likely
Uses Opportunities that drive short-term revenue & immediate challenges Multi-year projects, significant investments, purchasing durable assets (real estate, equipment, etc.)

Short-Term Vs. Long-Term Business Loans: Pros and Cons

Both types of financing have advantages and disadvantages for certain situations. Continue reading for the pros and cons of short-term vs long-term financing.

Type of Financing Description
Short Term Financing Pros

  • Easy qualifications
  • Simple application process
  • Fast disbursement of funds
  • Abridged schedule gets you out of debt faster


  • Higher interest rates
  • Frequent payment schedule
  • Lower funding amounts
  • Not as flexible as business lines of credit
Long Term Financing Pros

  • High funding amounts
  • Extended repayment schedule
  • Lower interest rates
  • Great for long-term projects, where you won’t see an immediate ROI


  • Restrictive eligibility requirements (high credit score, lengthy time in business, etc.)
  • May require collateral
  • Lengthy application process
  • Longer repayment can increase how much you pay in interest

Short-term business loans are used for short-term needs, while long-term loans are designed for opportunities and challenges outside of the 18-month time frame. If your goals are right in the middle and you’re unsure of which one would work best for you, consider one of the most important aspects of business loans in general – the repayment.

If you think that daily or weekly payments would overwhelm your cash flow, you can opt for a longer-term and secure monthly payments. That will, in turn, increase the amount you pay in interest, but the cost of capital matters little when you can use your borrowed funds to pursue revenue-driving opportunities.

Short Term Vs. Long-Term Business Loans: Loan Duration

Determining long-term vs short-term loans comes down to the loan’s duration. It’s one of the most important factors, and it impacts your bottom line more than you’d think.

Type of Financing Description
Short-Term Business Loans Repayment schedules of 18 months or less.
Long-Term Business Loans Repayment schedules of 2+ Years (Up to 25 years)

Don’t choose the wrong repayment! Less time to pay back the borrowed amount can add pressure to your cash flow. If you’re worried about your ability to repay a loan on a schedule offered by a lender, don’t feel pressured to take that offer.

There’s always a better deal out there. Shop around, compare offers, and never sign a contract you aren’t 100% confident in.

Short Term Vs. Long-Term Business Loans: Loan Amounts & Interest Rates

Although a loan’s duration is important, there are a few more factors to consider when choosing between short-term vs long-term financing – The funding amounts and interest rates.

Type of Financing Description
Short-Term Business Loans Lower Amounts; Higher Interest Rates
Long-Term Business Loans Higher Amounts; Lower Interest Rates

Don’t Let This Fool You – Borrowers end up paying more interest on long-term business loans because of the extended repayment schedule. This is because the interest is spread over a much longer term, whereas borrowers escape debt faster in short-term financing scenarios.

However, the higher interest rates and more frequent payments that characterize short-term business loans could offset the benefit of lower interest. After all, saving a little money matters little if you’re unable to repay the borrowed amount entirely.

If you’re having trouble choosing between long-term vs short-term loans, reach out to National Business Capital’s expert advisors and learn more about the options you qualify for.

Short Term Vs. Long-Term Business Loans: Which Is Best?

Honest answer? It depends on your business and your goals.

Short-term financing is best for driving short-term revenue and plugging challenges, whereas long-term financing is better suited for more significant, long-term investments, like a major fixed asset purchase.

However, if you’re considering making a more sizable investment in your business, long-term financing can spread the cost over an extended schedule. Not only will this preserve your cash flow, but it also increases your purchasing power and allows you to afford a new caliber of equipment or assets.

Choosing between short-term loans and long-term loans isn’t always a quick decision. If you’re unsure, reach out to the expert Business Finance Advisors at National. They can learn about your goals, explain your options, and make recommendations on which one would fit best for your business and where it’s headed.

The Bottom Line

There’s no one-size-fits-all approach to financing. Every business is different, and every entrepreneur has different ways of going about investing in growth.

Regardless of the type you’ve chosen, you need to work with the right lender to take full advantage of your financing. Unfortunately, finding that lender isn’t always straightforward.

You’ll need to shop around, compare offers, and determine the one that allows you to grow with as little friction as possible. At National Business Capital, we shorten that process considerably through our 75+ lender marketplace and experienced team.

You receive multiple personalized offers with one application, then our Business Finance Advisors help you select the option that best fits your needs. With $2+ billion secured, you can trust that we know a thing or two about using financing as a tool for growth – we’ve been doing it since 2007.

Complete our digital application to see what opportunities we have available for you.