Running a small business is rewarding, but it comes with several challenges. According to the Small Business Association, only 50 percent of small businesses will survive at least five years. A common reason that small business ventures fail is poor cash flow. Even the most profitable companies can struggle if they don’t manage their finances effectively. Short or long-term financing can help combat small business cash flow challenges. The supplementary capital from a business loan can be used to cover daily expenses and grow your business. Before filling out your loan application, you need to figure out what type of loan holds the most value for your specific business goals. Whether your loan feature a short or long term can impact everything from how much interest you pay to how much money you can ultimately borrow. Main Differences in Term Loans When seeking business financing, you have the option of choosing a short-term or traditional term loan. The major difference between these loans is their repayment terms. In general, traditional term business loans have a repayment schedule lasting several years. While short-term financing allows business owners to pay back the loan over a shorter period, ranging from several months to a few years. Many small business owners prefer short-terms loans as they provide fast access to capital without having to take on larger, longer-term debt. Deciding Between Different Term Loans Not every business owner should pick one type of loan over the other. Deciding on a lending option is not a one-size-fits-all approach. Here are some of the major factors that influence whether you should invest in short-term or traditional term business loans: \tHow quickly you need access to funding \tThe loan amountyou will need \tThe type of lender you plan on using Funding Approval Speed Business owners who need access to cash quickly may benefit from applying for short-term business loans. These types of loans can provide you with the funds you need, fast, oftentimes in as little as 24 hours. Additionally, short-term loans are easier to apply and qualify for. Traditional term loans typically require a longer approval process and are more difficult for small business owners to obtain. The Cash Amount of Your Loan Short-term business loans are often best suited for small business owners who need small amounts of money to cover immediate expenses. In contrast, those seeking large amounts of financing may be a better fit with long-term loans, so they are not rushed to pay back a large sum. Another factor worth noting is that while there’s a more rigorous approval process and it takes a longer time to pay them back, long-term loans typically have lower interest rates than short-term loans. Different Types of Term Loan Lenders Small business owners may have to seek out different sources for traditional term loans than they would for short-term loans. Traditional banks are the most popular source for traditional term business loans. Business owners may have to sit with a loan officer to discuss their borrowing options. They will need to fill out detailed applications and hand over financial statements related to the business. Certain banks might even require business owners to create a presentation of their business plans to make sure they are lending to the right person. The market for short-term financial lending has grown rapidly. If a small business owner would rather pursue short-term financing options, they can explore a variety of options, from traditional banks to online alternative lenders. According to a study by NDP Analytics, the number of loans offered by online small business lenders increased by 50 percent between 2015 and 2017. This upward trend reflects small business owners' increased need for fast access to working capital. Qualifying for Different Loan Terms One of the main differences between traditional term and short-term business loans is the criteria for qualification. Since short-term loans entail a shorter, less taxing application process and require less documentation. Typically, business owners will need to provide their credit profile and financial history. Traditional term financing approval is more demanding and requires small business owners to present much more documentation. Also, gaining approval is more difficult for traditional term financing with a traditional lender. This is because large banks often put strict standards on borrowers of traditional term loans. The Best Loan Term for Your Small Businesses Now that you understand the differences in term loans, you may be wondering what option is best for your business. When it comes down to it, there is no overall "better" type of business loan. Rather, your specific business goals and needs will determine which loan is best for you. Generally, small business owners are more suited to short-term loans, as they increase access to working capital without causing businesses to go into longer-term debt. No matter what type of business loan term you choose, it's crucial that you work with a lender who has your best interest in mind. Seek out a lender who understands the day-to-day workings of small businesses and who can adapt to support your individual goals and strategies.