Managing business finances may have been complex in the past but adding a pandemic into the equation certainly complicates the situation. Deciding how to utilize short term and long-term financing options has been a crucial aspect of advancing businesses, and as we are amid COVID-19, they have never been more important.

Financing is undoubtedly a significant aspect of every business. Firms often need financing to pay for their assets, equipment, and other important items, and financing options can be either long-term or short-term. There are different financing options for both choices and businesses must determine what is more effective based on their immediate and long-term objectives.

Small businesses owners tend to gravitate toward short-term financing because of the speed and convenience, and because it is easier to find short-term lenders who cater to business owner’s needs. Small business owners need practical solutions that will be effective in a short amount of time, and short-term financing is usually a viable option. The comparatively quick approval process and higher approval rates mean that small businesses spend less time securing the loan, and more time putting those funds to use by improving the business. Some benefits of short-term finances include:

  • Quick application and funding process
  • Reduced fees over time
  • Better approval rates
  • Collateral may not be required

On the contrary, long-term financing provides business owners with a large amount of capital for extensive, multi-year use. This is the preferred financing option for large businesses that have an established financial history, availability of collateral, and a purpose for the proposed working capital. A few advantages include:

  • Availability of high dollar capital
  • Can be used for massive marketing campaigns and/or product development
  • Accounts for high costs of operating a large business
  • Longer term repayment helps keep payments manageable

It is important to note that short term financing may make it hard to secure large amounts of capital and rates might be slightly higher. Additionally, long terms options will probably require a collateral and have stringent financial requirements. However, both long term and short-term financing options can be advantageous depending on the business they are used for. Currently, however, short-term financing provides speed, flexibility, and convenience, and may be especially favorable to support small and medium sized business needs during these trying times amid a pandemic.

In addition, it is critical to mention that our nation’s businesses are currently facing an unprecedented economic disruption due to the COVID-19 outbreak, so small businesses are receiving additional aid because of the limitations caused by the pandemic. On March 27, 2020, the President signed into law the CARES Act, which contains $376 billion in relief for American workers and small businesses. Also, in addition to traditional SBA funding programs, the CARES Act established several new temporary programs, such as Paycheck Protection Program, and EIDL (relief to small businesses and non-profit organizations that are currently experiencing a temporary loss of revenue).

It is important to research both long- and short-term financing options and pursue the appropriate solution for the advancement and growth of specific businesses. Let us help you get the working capital you need to keep your business afloat during unprecedented times.