People become very wise when they join a business to start one. Many things make them intelligent and clever which is good as they need to survive other business competitors. In order to do keep up, they have to make several harsh decisions to cope.
One of those decisions is the choice of which term loan will be the best for the business. Most of the businessmen are stuck between selecting short term loans or Medium Term Business Loans. They are under the impression that both these loans have the same features but there are lots of differences in both of them.
Description of Short Term Small Business Loans:
You can immediately know the difference just by the names. Short Term Small Business Loans are for those urgent needs that must be fulfilled at the very moment. These loans are very important when you are in need of making repairs, maintenance of equipment, make a bridge between the irregularity in payments received and paid, buying items for inventory and managing other tasks. Both small and big businesses can benefit from this term loan.
Explaining Medium Terms Business Loans:
This loan is midway between the short term and long term loans. Everything about this loan goes in between. The amount received from this loan can be used for a number of things like; hiring and training staff, heavy duty machinery purchase, expanding the business to other locations, increasing the credit score and so many other things can be done.
Features Separating both Term Loans:
There are more features that separate the two term loans than they have in common. One thing that is common in both term loans is that small business can fully benefit from it. The difference in the features of the short term and medium term loan depends on the various terms and conditions that are applied to them. The following distinct features make them different;
The Requirements for Qualification:
The very first point that differs is the required documents and qualifications for each loan. To qualify for short term loans the borrower must have;
- Bank and processing statements dating back at least 4 months.
- The business should be running for 2 months.
- Monthly revenue of $7,000 must be earned.
- Personal and business documents.
The following medium-term loans requirements must be fulfilled;
- The credit score should be higher than 600.
- Yearly profit should be more than $500,000.
- A minimal time of running business running 2 years.
- Bank and balance sheets from 1 year.
- Personal and business tax return info.
Both of these loans are offered by different lenders government, private and online like Orumfy to give all people easy access to them.
Period of the Term Loans:
Another difference is in the time frame of the loans borrowed. This will give you an insight into the period of the application, approval and repayment time. The short term loans as mentioned before are used to accomplish daily goals so the repayment time is also short. The usual time period is from 6 months to 18 months. But the other one has a period of 1 year to 5 years because the usage of the loan is far more than the previous one.
Amount to be borrowed:
Even the amount that you borrow is not the same so how can people think that these term loans are the same? The minimum amount of $2,500 and a maximum of $250,000 can be borrowed in a short term loan and on an average $20,000 is taken as loan. Whereas, the money borrowed as medium-term loans is from $25,000 to $500,000 and loan amount lent normally is $110,000.
Approval Speed Varies:
It normally takes 3 working days for short term small business loans to be approved. This time is taken to verify the documents that you have submitted with the application form. But the speed of approval varies in medium-term loans because the amount is high and the documents also need to be confirmed. This period can often be weeklong so patience is necessary.
The small short term loan is used for small purposes like paying bills, repairing equipment, filling up daily inventories and other routine tasks. But the other loans are much higher in an amount so the use is also big. But both serve the purpose of handling Monterey emergencies.