Short-term loans range from 1 to 2 years. It can be used as working capital, trade credits, bills of exchange, etc. These collateral-free advances come with a high rate of interest as they are spread over a short tenor. You can avail short-term finance to fund your immediate business requirement, like boosting working capital or make small purchases.
Medium-term loans are the most sought-after financial products. These advances range between 2-5 years and are collateral-free. You can avail this type of business loan from any reputed financial institutions and NBFCs to cater to diverse business requirements. It includes – investing in inventory, expanding an existing business to improve your firm's productivity and competitiveness.
Long-term loans are secured that are spread over 5 to 20 years. These finances come with less stringent repayment terms. That is because you are required to pledge your asset as collateral; hence, if you default on payments, your lender has to option to liquidate your assets and recover the outstanding debts. The rate of interest for long-term advances is also lower than a medium or short-term loan.
It is always recommended to check your eligibility criteria along with your income stability and repayment capacity before applying for any term loan.