What Is a Short-Term Business Loan & How Can It Help Your Company?
Have you finally reached a point in your business where it’s time to get a business loan? If it is, then don’t worry, as most companies need to take out a loan to survive. In fact, taking out a loan is all part of the game of business. Take note though, that while there are many types of business loans out there today, if you only need something to get you through a short period, a short-term business loan may just be the right choice.
What is a Short-Term Business Loan?
A short-term business loan is designed to provide business owners with immediate access to working capital to help address financial issues. Typically, a short-term business loan will be provided to the business owner in a lump-sum payment and he or she must pay it off within one to two years.
This type of business loan is essential for businesses that need a quick cash flow replenishment, as letting cash flow issues become a serious issue can cause bigger problems. This is when a short-term business loan becomes convenient. However, before you take the plunge and take out a loan, you need to keep in mind that this type of loan will not solve all your problems.
There are different types of short-term business loans, and the most common ones are:
- Term loans – similar to traditional bank loans but with shorter repayment terms.
- Line of credit – this type of business loan offers long repayment terms and could have higher interest rates.
Should You Get a Short-Term Business Loan?
Most business owners are hesitant when it comes to taking out loans. Some see it as a huge risk that they don’t want their business to take. However, a business loan can be part of a successful financial strategy that can help your company stay afloat and, eventually, reach optimal growth and success.
Take it slowly through a short-term business loan and see how it works for you. To help you decide, here are some of the advantages of a short-term loan:
- Stable – a short-term business loan is straightforward, which makes it stable and predictable. Once you get approved, you will be given a predetermined amount of cash upfront and you will need to sign a document that details repayment terms and other essential details.
- Ease of access – getting a short-term business loan doesn’t take a lot of time. It’s easy to apply and qualify for. When approved, the money gets funded quickly because there is less paperwork to deal with.
- Credit score – a bad credit score will not dictate the fate of your short-term business loan qualification, which makes it desirable for most business owners. For business owners that have poor or limited credit histories, short-term loans are ideal.
How to Get Low-Interest Rates
The key is to shop around if you want to get low-interest rates for your short-term business loan. There are many lenders out there that can provide you with different interest rates. Take your time and make sure not to send multiple applications—keep it to 1-2 applications to various lenders. Sending too many applications all at once can affect your credit score, especially if it’s not looking too good already.
Short-term business loans are helpful for all types of businesses. It can help a company receive the working capital they need to stay afloat and at the same time, it doesn’t burden a business owner with long-term debt. As such, short-term business loans are much more manageable and have considerably less risk.
We provide excellent advice on small business loans and other types of loans in Australia. We have experts to help you get the best short-term business loan—contact us today!