Short-term financing is a loan you take out and repay over a shorter period—generally one to two years. These loans are typically used to cover immediate needs, such as inventory or cash flow fluctuations.

In comparison, long-term financing usually comes with multiyear repayment terms. For example, if you take out a 7(a) loan from the Small Business Administration, your maximum repayment terms would range between 10 and 25 years. Long-term financing is used to cover more substantial purchases, such as equipment or a new facility.