There has been a steep rise in the number of alternative lending companies since the 2008 recession to help small to medium-sized businesses get funding. Fast forward to Covid times, and loan and business financing accessibility has increased even more.
With this flooded market, it is easy to feel overwhelmed and under-knowledged about the differences between a loan and business financing because isn’t it the same thing? Well, not exactly. There are a few differences between a loan and short-term business financing. The most evident factor is that a loan is categorized as a secured form of finance offered by a banking institution. Business financing is a less stringent application process, and an unsecured form of finance provided by alternative lenders such as us.
And while there are now many options out there for you to choose from, you must select a loan or financing option that is best suited for your business. Trust plays a significant factor in deciding on your lending “partner.” We get it; thus, many business owners make the uninformed decision to choose a high-capital, low-interest, long-term loan. However, short-term financing may be the more affordable, more accessible, and more appropriate form of funding for your business.
If you run a young company (less than 2 years, but more than 6 months), you won’t necessarily have many years of profitability to showcase, nor financial stability that long-term lenders need to evaluate to offer the best capital amount and rates to sustain your business. Thus, many small businesses fail in getting business loans from banks, as they just do not meet the criteria.
Below we’ve listed a few more differences between loans and financing and how to choose the best option for your business.
The Major Difference Between Bank Loans and Short-term Business Financing
The major difference between bank loans and short-term business financing from alternative lenders is their repayment terms.
Traditional business loans have a repayment schedule from 12 to 60 month – yikes! While short-term financing allows business owners to pay back the loan over a shorter period – from the day they receive the money up to 18 months.
Many small business owners prefer short-term financing as it is a faster way to access capital without having to take on larger, longer-term debt.
Requirements For Funding
When trying to get loans from a bank, the major con is the time it takes to get financed. Even with perfect credit and approval, the time frame from application to when the money is made available to small businesses can take days, weeks, or even months.
However, alternative financing is highly simplified, and there is a much shorter time frame for when funds are made available to you, with our approval time being less than 24-hours! So, what is required from either lender to get approved?
Short-Term Business Financing
6+ months in business
$15,000+ in monthly revenue
Long-Term Bank Loan
2+ years in business
$100,000+ annual revenue
The Best Option For Your Business
Deciding on a lending option is not a one-size-fits-all approach. First you need to ask yourself three questions that will influence your decision:
How quickly do you need access to funding?
How much money do you need?
Do you match a lenders funding requirements?
Business owners who need access to cash quickly will benefit from applying for short-term business financing. This option can guarantee a funding approval in as little as 24-hours of applying, bearing in mind you meet the funding requirements. Additionally, short-term financing is much easier to apply for – simple online application that takes less than 5-minutes. Whereas, traditional bank loans have a longer approval process and makes it very difficult for small businesses to obtain.
Short-term business financing amounts generally range from $5,000 to $250,000 and are well suited for businesses needing to cover immediate expenses. If you need larger amounts, loans would be the better option; however, it is easier for you to get refinanced by a short-term lender than from a bank, as your pay-off will be a lot sooner.
If you are ready to apply for fast, simple and secure funding, our short-term business financing is exactly what you need – our impeccable track record will help make that decision. We want to get you financed, today!