Many SMEs compare loans mainly by rate. But the bigger question is whether repayments match your cash flow cycle. A good facility supports growth. A mismatched facility creates pressure.
Short-term financing: best for timing gaps
Short-term facilities can work well when there is a clear repayment event, such as collections from invoices or contract milestones. Common use cases include bridging receivables, purchasing inventory for confirmed demand, or covering operating costs while waiting for payments. Credezo offers 3-12 month tenures with flexible early settlement options for SMEs who want short-term financing without being locked in.
Pros
- Matches short business cycles
- Often simpler to understand and plan around
- Reduces the risk of carrying debt longer than needed
Watch-outs
- Higher monthly repayment pressure
- Less tolerance for a slow month if you do not plan a buffer
Long-term financing: best for lasting investments
Longer tenures generally fit better when the benefit takes time to materialise, such as expansion, equipment upgrades, or improvements that raise capacity over months.
Pros: - Lower monthly repayments because costs are spread out - More breathing room while the investment ramps up
Watch-outs: - You may pay for an asset long after it stops delivering value - Over-borrowing is easier when monthly instalments look small
A simple way to decide
Ask:
- What is the repayment source?
- How quickly does the use of funds generate cash inflows?
- What happens in your “slow month” scenario?
If repayment depends on near-term collections, shorter tenures often fit better. If the benefits take time, longer tenures can reduce stress.
The flexibility factor: What if your situation changes?
Cash flow predictions are not always accurate. Before committing to any tenure, consider what happens when circumstances change.
If you can repay faster than planned—perhaps a large customer pays early, you close a bigger deal than expected, or seasonal revenue exceeds projections—early repayment terms become important. For short-term facilities, check whether there is an early repayment penalty and how any interest rebate is calculated.
The calculation method matters more than many borrowers realise. Some lenders use the Rule of 78, which front-loads interest and returns less to you if you settle early. Others use simple linear calculation, which provides a fair pro-rata rebate. The difference can be significant: on a $100,000 loan over 12 months repaid at month 6, Rule of 78 might return roughly 27% of remaining interest, while linear calculation would return approximately 50%.
If you need more time than planned, understand your options for restructuring, what late payment consequences look like, and whether there is any grace period before penalties apply.
Lenders like Credezo that offer zero early repayment penalties after 3 months and linear interest rebates give SMEs more flexibility to adapt when business moves faster or slower than expected.
Key takeaway
Tenure is a cash flow decision, not just a pricing decision. Choose the schedule your business can sustain across normal and slow months—and check the flexibility terms in case your situation changes.
If you are unsure which tenure fits your business cycle, apply for financing and we will help match a facility to how your cash actually moves.