Business Finance: Who Told You, You Need Long Term Financing?

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Most businesses do not understand the difference between long term and short term business financing. Most businesses indicate they want a bank loan for 3 years. If you are building a building, working on a long term project or you need to invest into your business and you will not see a return or cash for more than 12 months, than long-term financing is the way to go. However, if you can turn around cash every month, every 3 months, or 6 months; you don’t need long term financing. What you need is; short-term financing.   When making this decision you need to address first, how long will it take you to see cash? Second, understand that banks are not short-term finance players. Banks prefer long-term financing because they are usually higher loan amounts and they are less risky.   Next time you consider business finance, think in terms of long-term and short-term results.

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