Same dollar amount, very different cash flow impact and total cost. Short-term loans hit harder daily but cost less overall. Here's the math and exactly when to choose each.
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Short-term (6–18 months): Higher daily payment, lower total cost, best for working capital, inventory, contracts, and seasonal needs. If you can handle the daily payment — choose short-term.
Long-term (24–84 months): Lower monthly payment, more total interest, best for large equipment purchases or capital investments with multi-year payback periods.
The rule: Match loan term to the life of what you're financing. Financing a truck that earns money for 5 years? 48-month term. Bridging a 90-day cash flow gap? 6-month term.
A short-term business loan or advance runs 6–18 months. At MFE, these include working capital loans, merchant cash advances, and revenue based financing. Key characteristics:
Advance: $100,000 | Factor Rate: 1.30x | Total Payback: $130,000 | Term: 12 months
Daily ACH: $130,000 ÷ 240 business days = $542/day
Total financing cost: $30,000
The daily payment is significant, but you're debt-free in 12 months and paid $30K in financing costs — significantly less than a long-term loan at the same rate.
Long-term business loans run 24–84 months. At MFE, equipment financing offers terms up to 84 months. Traditional bank term loans run 24–60 months. Key characteristics:
Loan: $100,000 | APR: 18% | Term: 60 months
Monthly payment: $2,538 | Total paid: $152,280
Total financing cost: $52,280
The monthly payment is manageable at $2,538 — but you pay $52,280 in interest over 5 years, nearly double the $30,000 you'd pay on a 12-month short-term advance.
| Feature | Short-Term (6–18 mo) | Long-Term (24–84 mo) |
|---|---|---|
| Term Length | 6–18 months | 24–84 months |
| Typical Payment | Daily or weekly ACH | Monthly installment |
| Cost Structure | Factor rate (1.1–1.5x) | APR (8–25%) |
| Daily Cash Flow Impact | High (daily draw) | Lower (monthly) |
| Total Financing Cost | Lower overall | Higher overall |
| Approval Speed | Same day–24 hours | 24 hours–7 days |
| Credit Score Required | 500+ | 600+ |
| Collateral | None (UCC-1 + PG) | Equipment or blanket lien |
| Revenue Minimum | $10,000/month | $8,000/month |
| Best Use | Working capital, ops, inventory | Equipment, fleet, improvements |
| Loan Term | Rate/Factor | Daily Payment | Monthly Equivalent | Total Cost |
|---|---|---|---|---|
| 6 months | 1.20 factor | $1,000/day | ~$20,000 | $20,000 |
| 12 months | 1.30 factor | $542/day | ~$11,700 | $30,000 |
| 18 months | 1.40 factor | $389/day | ~$8,400 | $40,000 |
| 36 months | 18% APR | — | $3,615/mo | $30,140 |
| 60 months | 18% APR | — | $2,538/mo | $52,280 |
| 84 months | 18% APR | — | $2,032/mo | $70,686 |
Key insight: The 12-month short-term advance costs $30,000 — the same as a 36-month bank loan at 18% APR. But the daily payment on the short-term loan is $542 vs $121/day on the 36-month loan. It's a cash flow trade-off, not just a rate question.
Short-term business loans have repayment terms of 6–18 months with higher daily payments but lower total cost. Long-term loans run 24–60 months with lower monthly payments but significantly more total interest paid over the life of the loan.
Short-term loans almost always have lower total cost if you can handle the higher daily payment. A $100,000 short-term advance at a 1.3 factor (12 months) costs $30,000. The same $100,000 at 18% APR over 60 months costs $52,280 in interest.
Choose long-term financing when buying equipment or real estate with a useful life of several years, when cash flow can't support high daily payments, or when you're funding a project with a long revenue ramp-up period.
MFE's short-term working capital loans and MCAs run 6–18 months with daily or weekly ACH payments. Revenue based financing runs 3–18 months. Equipment financing at MFE runs 24–84 months.
Yes. MFE allows early payoff and may offer a discount for early repayment. Since short-term loans use factor rates (not APR), verify your prepayment terms before signing — some lenders require full payback even if paid early.
A 12-month loan on $100,000 requires ~$535/day in payments. The same amount over 60 months requires ~$2,538/month. The shorter term hits cash flow harder each day but frees you from debt faster and at lower total cost.
Yes, for the right situation. If you need capital to fulfill a specific contract, bridge a seasonal gap, or take advantage of a time-sensitive opportunity, a 6-month loan can be cost-effective — especially if you pay it off faster than scheduled.
MFE offers equipment financing with terms up to 84 months. For working capital, our terms run up to 24 months. Revenue based financing runs up to 18 months.
Our advisors will review your cash flow and recommend the right term length and product for your business goals.
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