Business loans can be an incredibly helpful resource for your business. You must have heard the famous phrase money makes money — business loans are the right example.
Finance gives you access to the capital that would otherwise not be available. These loans can help your company carry out major projects and initiatives. You can use the borrowed finance to effectively streamline the operations of your business and work on ambitious plans and goals for your business’s future. Whether you plan to expand your business or go into a new industry, want to save cash in the long term, or need extra money to purchase new equipment, business loans can help you.
If you are interested in getting business loans, one of the many factors you need to think about is whether you need a long-term loan or a short-term loan. Deciding which one is the best for your company becomes trickier due to the varying factors involved. Hence, before you apply for any business financing, it is vital to know what you need the funding for, how quickly you need it, and whether or not specific finance will work for your situation.
The choice between choosing a long-term loan or a short-term loan is not as simple as most people would think. Hence, in this blog, learn everything you need to know about business term loan Singapore to make the choice.
Everything You Need to Know About a Short and Long Business Term Loan Singapore
Long Term Business Loans
A long-term business loan is a funding option for more than five years. It can cover various business needs, such as financing the property purchase, covering operational costs, funding the development of new products or services, and hiring new employees.
Long-term loans are usually fixed-rate loans, meaning the interest rate will remain the same throughout the life of the loan. It is good news if you are worried about rising interest rates in the future that could increase your monthly payments. It generally has larger principal amounts and lower interest rates than short-term loans.
It can be a good choice if you do not have the cash in hand to pay for something right away, but you know you will be able to make the payment over time.
Benefits of Long-Term Business Loans
1. You can Plan for the Future
With a long-term loan, you can pay for large expenses in advance and then budget for them in smaller amounts over time. It allows you to offer better terms and pricing to your customers while still reaping the benefits of receiving payment in advance.
2. Free Up Cash Flow
To grow your business, you need flexibility in resource allocation, especially if your business is seasonal or cyclical. A long-term loan allows you to pay for an asset upfront, which frees up cash flow for other purposes throughout the loan term. It helps keep your cash in hand when it is needed most.
3. Fixed Payments
Unlike short-term business loans or lines of credit, many long-term loans have fixed interest rates and monthly payments, making them easier to budget for overtime. You will know exactly what you need to pay each month, and you can plan accordingly.
4. Lower Interest Rates
Long-term loans often have lower interest rates than short-term financing solutions. It is because they are less risky since lenders anticipate getting their money back.
5. Build Credit
Long-term business loans help you build credit for the long haul. They send positive signals to banks and other lending institutions, who will see your willingness to pay back your loan over an extended period as an indication that you are likely to do the same with future debts and loans. Moreover, they appreciate the fact that you’re not rushing to pay off your debt but giving yourself enough time to do so responsibly.
6. Allow You to Pay Less Upfront
One of the biggest advantages of a long-term loan is that it gives you time to pay off your debt, which makes it easier on your cash flow than other types of financing. Businesses with seasonal sales cycles or irregular income streams can pay off debt slowly and consistently over time. Moreover, you will be paying less each month than if you took out a short-term loan.
Short Term Business Loans
Short-term business loans are designed for businesses that need quick funding for one-time expenses and may not qualify for other types of credit. The terms of these loans can vary, but the borrower generally needs to pay them off within a year.
These loans usually require no collateral, making them an ideal option for startups or businesses without many assets.
There are several ways you can use short-term business loans, depending on your specific need. Some examples include:
- Using a short-term business loan to cover payroll costs. If you have got a small business with limited cash flow, it can be difficult to cover all the expenses to run your business — especially the expense of paying salaries to your employees. A short-term loan is a quick way to get the money you need to pay your staff on time.
- Using a short-term loan for inventory and supplies. Every retail business has its unique financial cycle — there will always be times of the year when you will have less money coming in than usual or when you will have unexpected expenses that come from nowhere. Short-term business loans are great for providing an extra cash boost during these downswings. So, you can afford the items you need to keep your shelves stocked and keep your customers happy.
Benefits of Short-Term Business Loans
Here are some of the benefits of short term business loans:
1. Quick Loan Approval
Unlike traditional bank loans, which can take months to receive approval, short-term loans take as little as 24 hours. It means you can access funds when you need them rather than waiting until your application is finally approved.
You can have the money in your bank account in a matter of days or even hours.
2. Seamless Repayment Terms
There is no need to worry about early repayment penalties or hidden fees in short-term loans. You will know exactly how much you owe each month and when the entire loan will complete. A clear repayment plan allows you to manage your cash flow more effectively.
3. Affordable Interest Rates
Short-term loan interest rates tend to be much lower than other types of unsecured debt. It can save your business thousands of dollars in interest costs.
4. Less Paperwork
While some lenders may ask for your business plan or financial projections as part of the application process, this is usually not required for short-term loans. The process of documentation is much simpler than that of a long-term loan.
Both kinds of loans serve different purposes for different businesses. Make your decision regarding business term loan Singapore wisely and make investments worth the business growth.
Once you decide which kind of loan you need, you can reach out to OT Credit. We offer competitive loan rates for your personal and financial needs. Get in touch with us at 6292 0119 to apply for a loan now.