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Small businesses borrow money for any number of reasons, and the loan amount will vary wildly based on your company’s reason in particular. After all, a trucking company looking to replace the tires on its fleet of vehicles isn’t paying anywhere near as much as a software company looking to buy an office building.
Remember, when a traditional bank or online lender is deciding whether to loan your company money, what they’re really considering is how likely it is that your company will be able to repay that loan with interest. They’re thinking about how likely is it that your company will earn them money. That decision is, in effect, a bet on a borrower.
A long-term loan typically will have a larger loan amount than a short-term loan. That makes sense for both lenders and borrowers. For lenders, it doesn’t make sense to give out many multi-million-dollar short-term loans because it isn’t very likely that the business will be able to repay that loan. Similarly, they don’t want to give out a $5,000 loan with a ten-year repayment term. That’d mean placing a tiny bet, and the best-case scenario may only earn them a few hundred dollars in interest.
So think about why you’re seeking out this new business loan. How big does the loan need to be to fulfill the purpose you’ve got in mind? If the loan is considerably large, you may want to consider a long-term loan.
In short: If you need a lot of money, you might want to consider long-term loans. If you only need a bit, a short-term loan might be more logical.
