For financing your start-up or expanding your existing business, you may need a loan. In India, you can get your hands on an array of loans that can cater to all your business needs. NBFCs even provide business loans or loans against properties which come with no restrictions. All of such advances come under the umbrella of either a short-term or a long-term business loans.
A short-term loan generally has a tenor of 12-60 months while a long-term one can range up to 20 years. Generally, secured loans like mortgage loans are long-term in nature. However, unsecured ones like personal loans come with shorter repayment tenors.
If it is confusing to choose between a short-term business loan and a long-term business loan, read these 5 points to help you make the choice:
When to avail finance?
Long-term loans are suited for substantial investments. Expenses like purchasing plant & machinery, equipment, property, etc., can be fulfilled using long-term loans.
Short-term loans can help address immediate fund requirements. Shortages in inventory, paying wages, etc., are some of the ideal uses of a short-term loan. Many business owners also avail such a loan for consolidating debts.
Although going into debt for clearing the outstanding ones may seem outlandish, it can help the business maintain ground. Non-clearance of debt can lead to bankruptcy. Hence, to keep the relation between debtors and businesses cordial, companies opt for short-term business loans.
Long-term loans can have a tenure ranging up to 240 months making it considerably less-complicated for repayment.
Short-term loans have tenures going up to 60 months. As the loan amount is small, repaying it within a short tenure is fairly convenient.
Long-term loans are secured and hence, require an asset as collateral or a guarantor. Documents pertaining to the asset remain with the lending institution until the full loan repayment.
Short-term loans are unsecured and thus, collateral-free. Financial institutions check the credit score of a customer before loan approval. A credit score of 750 or above will vouch for the credibility of an applicant and act as security.
Long-term loans usually have a longer approval process as the lender has to verify the documents, especially the ones for the property. Thus, a long-term loan can take up to 72 hours or more for disbursal.
NBFCs can approve a short-term loan within 24 hours as they don’t have to verify an asset’s documents.
For long-term loans, you have to provide property documents, KYC documents, and other relevant financial documents. For short-term loans, you have to provide only KYC and financial documents.
Both long-term and short-term loans come with features and benefits catering to your various requirements. You need to choose the one that suits you the best depending on these requirements.
Bajaj Finserv offers both short-term and long-term Business Loans with many features:
- Up to Rs. 30 Lakh of unsecured loan.
- Low and attractive interest rates.
- Loan disbursal in the bank within 24 hours.
- Only two documents required.
Bajaj Finserv also provides pre-approved offers with these loans that make the process of availing finance less time-consuming and complicated. These offers apply to personal loans, business loans, mortgage loans and various other financial products and services. By furnishing few of your essential details, you can check your pre-approved offer.