The basic trade-off
Short-term funding usually carries a lower total cost but higher periodic payments. Long-term funding spreads the payment out, easing monthly pressure while increasing the total paid over the life of the facility.
Match the term to the asset
Fund short-lived needs — inventory, a marketing campaign, a cash-flow gap — with short-term capital. Fund long-lived assets — property, major equipment, a build-out — over a longer term. Financing a five-year asset on a six-month schedule is a common way to create avoidable strain.
Test the payment against a bad month
Take your slowest month over the last year and check whether the proposed payment would still have been comfortable. If it would not, the term is probably too short regardless of what the total cost comparison says.