Cons of a Medium-Term Business Loan

Cons of a Medium-Term Business Loan

Thankfully, a wide range of small business loan funding solutions exists that let you bridge these gaps in your cash flow.

One of the popular solutions for several people is a medium-term business loan. It can also be a great tool to finance near-term expansion projects while giving you the flexibility to repay the loan over many years. However, a medium-term loan is not for everyone. It is important to think about all the features of the loan in order to decide whether it is the right option for your small business.

Several features of a medium-term loan may not make it suitable for your business, including the following ones.

More Stringent Loan Approval Process

Because repayment can take place over many months, lenders are likelier to scrutinize your business creditworthiness. Usual qualification points include annual revenue of at least $25,000, and a score of 600 or more. Besides, your business must meet the time-related criteria in order to qualify. Usually, it must have been in operation for at least one year before applying, but that varies with the lender.

Risk of Accrued Interest

Extending your payback period by many years can lead to a considerable amount of accrued interest, the precise amount of which depends on many factors. These loans can become a lot more expensive over time.

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