Capital is the lifeline of a business, whether big or small. You need it for running the business operations seamlessly, meeting day to day expenses and implementing long-term growth plans. But what if you fall short of capital at any point in time? An issue that small businesses are more likely to face, shortage of funds can be killing for any organization.
However, you can address this challenge with business financing that fulfills your additional capital needs and gets your business back on track. Speaking about small businesses, short term loans come ahead as the best form of business financing. Let us highlight its benefits for such organizations.
Quick application process of short term loans
Besides the fact that it is easier for businesses to qualify for a short term loan, the application process is fast and hassle-free as well. You can check out local money lenders or even apply for a loan online.
The latter is a more convenient option as it enables you to apply in just a few clicks. There is no need to gather piles of paperwork to get a short term loan online as it happens when you are applying for a traditional bank loan. All you need to do is access the loan website, fill a form and you are all set with the application. What’s more, the approval can be equally fast provided that you qualify.
Easy approval process as well
Another benefit of short-term loans for small businesses is that it is easy to get approval for them. Obviously, the quick and simple application process for short-term loans makes all the difference to how early you get the funds in your capital. This is similar for a revenue advance, which small businesses can apply now for, and obtain the funding quickly.
Additionally, the fact that you are borrowing money for a shorter span of time improves your chances of getting a quick approval. Lenders require less information because of the short-term nature of funding. This is extremely helpful if you have expenses due in the near future and are not in a position to defer them while waiting on an extended approval process.
Easy to qualify for such loans
The biggest challenge that any small business faces while getting loans is to qualify for them in the first place. Banks and lenders consider a number of factors before providing financial assistance to small enterprises.
Getting short-term business loans is relatively easy because qualifying for them is not a big deal. In fact, you may even qualify for such a loan with a limited credit score and history of the business. The lender will probably have a good look at the personal credit and business credit scores of the borrower but the requirements are comparatively less stringent than those for a long term loan.
Extensive flexibility makes them a good option
Short term loans serve the benefit of immense flexibility as a funding option for small businesses. They can be customized according to the needs of your business. You can come to a mutual agreement with the lender on factors such as loan repayment terms and interest rates.
Normally, short term loans for business are for a short duration but there is no hard and fast rule about the timelines. You can take it for a few months to up to a year depending on your financial needs and repayment capacity. You can even discuss the terms related to loan rollover and benefits that you may avail of with early repayment. So flexibility is what you get with this financing option!
Cost-effective in the long run
The cost of the loan matters a great deal for small businesses because they often have limited resources. Although short term loans can carry a higher rate of interest than other funding alternatives, their shorter repayment schedule makes them a more cost-effective loan option for small businesses in the long-run.
Long term loans, on the other hand, may have a significantly lower interest rate but you keep paying year after year and the amount may actually add up to higher than what you repay for a short term loan. The fact that the loans for shorter durations are a short term liability for your business also reduces your stress.
Serve as an emergency safety net
Seasonal fluctuations and emergency cash are common issues that small businesses come across. To make things worse, there could be unexpected events that can happen suddenly. Such situations can lead to slowdowns and a drop in revenues, which may become lethal for small businesses in particular.
A short term loan serves as an emergency net in such situations and comes to your rescue when you need funds the most. Moreover, they are easy to procure and you need not struggle much with the formalities. After all, you cannot put your business at stake for something that happens out of the blue.
How to decide whether short term loans are right for your business?
Now that you understand the comprehensive benefits of short term loans, the next obvious question is whether it would be an apt choice for your small business. Even before you start considering this financing option, have a look at your requirements first.
Short term loans are ideal only if you need funds for a short timelines, ranging from a few months to a year. Obviously, this option will not work for long term capital needs. The interest rates and your capacity to repay are some other factors that can help you make a decision.
Once you are sure that a short term loan is the best choice for your needs, the next obvious step would be to check your eligibility. Further, you need to explore the options and compare them. Look for loan providers who provide funds at optimal interest rates and with minimal formalities.
You may get in touch with banks and traditional lenders for the loan but online borrowing is coming up as the smarter approach. Even if you may be able to get a short term loan easily, remember that it is still a liability for your business. Use the funds judiciously and take a responsible approach to repayment.
