As a general rule, short-term business loans must be repaid within 5 years. This means that if you’re looking for a longer-term finance arrangement, you may need to explore other options.
If you’re currently exploring your business finance options, then the length of time you have to pay back a loan is an important consideration. As the name suggests, short-term business loans have a shorter repayment period than other forms of finance. They are often a practical means by which to give your business a short-term cash injection.
Is it true that short term business loans must be repaid within 5 years?
Short-term business loans are a flexible form of business finance that gives business owners access to funds that they may need for a variety of purposes. Depending on the amount of money that is borrowed, the repayment period can vary.
As mentioned above, short-term business loans must be repaid within 5 years. This means that if you’re looking for a longer-term finance arrangement, you may need to explore other options.
The advantages of a shorter repayment period
The shorter repayment period for short-term business loans carries a range of advantages for businesses.
Short-term business loans will generally have a higher interest rate than longer-term loans, but due to the shorter repayment period, you pay less interest overall. This means that you may pay significantly less interest on a loan over 12 months compared to a loan taken out over 5 years. For that reason, it’s important to select a repayment plan that is affordable but which enables you to pay off the loan as quickly as possible.
Shorter repayment periods also reduce the risk of something going wrong with your finances which means you cannot pay back your loan. There is also less threat of your loan creating financial problems for your business at a later stage. Should you be struggling to repay a loan taken out over three years it may be possible to restructure the loan so it can be paid back over five years. This may reduce the monthly payments, making it more manageable.
How long is a typical short-term business loan?
While short-term business loans must be repaid within 5 years most will be taken out over a shorter period. This flexible form of finance can be structured in different ways, such as interest-only where the loan amount is paid back at the end of the term. This option might be taken if a business owner expects to generate enough returns to easily pay the loan in a short space of time. A repayment loan, where you pay back both the capital and interest over an agreed time period, is usually the most practical option. A bridging loan is designed to cover a short-term funding gap.
Whichever option you choose it’s important to agree on a repayment period that is realistic but allows you to pay back your loan as quickly as possible.
Short-Term Business Loans from Business Finance House
At Business Finance House, we’re experienced at helping business owners find the most suitable and practical short-term business loans for their needs.
If you’re considering your short-term financing options, then our friendly and professional team are here to help. We cover all locations, from business loans in Liverpool, Cheshire, or nationwide! From Cash flow loans, to bridging loans, we can work out how to get a short term business loan for you.
