When You Need A Short-Term Business Loan, Here’s What to Know
by Mony Shah Loans & Credit 30 September 2023
It can be scary to borrow money for your business. It’s easy to envision yourself trapped under a boulder of debt for years to come. But that doesn’t necessarily have to be the case.
When your business is having cash flow problems or needs an infusion of cash to expand or upgrade equipment, you should consider a short-term business loan. A short-term loan can provide the funds you need now and you can repay it quickly, so it doesn’t have to hang over your head for years.
What a Short-Term Business Loan Is
A short-term business loan has a much shorter repayment period than a traditional long-term loan. Repayment terms typically range from three to 18 months. You can get short-term loans with repayment terms as long as two or three years, but that’s about the limit. Instead of making monthly payments on a short-term business loan, you’ll make payments daily or weekly. You’ll pay the loan off fast, but you’ll have to be prepared to make frequent installments.
You can get short-term business loans from traditional banks and credit unions as well as from online lenders. It usually takes weeks or months to get funds disbursed from a bank or credit union loan, and you’ll have to put up collateral.
However, there are lots of online lenders out there who can approve your loan within 24 hours and have funds in your account the next day. These lenders typically have less stringent qualification requirements but may charge much higher interest and fees than traditional lenders.
When to Take Out a Short-Term Business Loan
When should you take out a short-term business loan? Your business could need cash for any number of reasons. A common reason why business owners take out short-term business loans is because their industry is cyclical and they need funds to help cover operating costs until the busy period begins again.
You might also need a cash infusion to handle an emergency expense. Perhaps an important piece of equipment has broken or the office has flooded. You need money to handle it. You could even take out a short-term loan in order to have the capital on hand to seize a business opportunity.
Perhaps you have the opportunity to buy a piece of much-needed equipment for cheap or to get your hands on a pile of inventory for a good price. A short-term small business loan can help you get it.
Overall, it’s a good idea to take out a short-term business loan when you need some quick cash but don’t want to carry long-term debt. You’ll have the loan paid off in a few months or maybe a year at the outside. If you have bad credit or your company is too new to qualify for traditional bank loans, you should consider getting a short-term business loan from an online lender.
How to Get a Short-Term Business Loan
It’s not hard to get a short-term business loan. If you want the best interest rate and you have good credit, you might try getting a short-term business loan from a bank or credit union, but you’ll probably have to put up collateral and it might take them months to approve your loan, so if you need cash now, that’s not the best option.
For most small business owners who need a quick influx of cash, a short-term loan is the best option. You can apply online for short-term small business loans from any one of several reputable online lenders, and you usually won’t have to put up any collateral. Unsecured loans like these do come with higher interest and fees, but you won’t risk losing any of your assets if you default on the loan.
Online lenders are the way to go if you need cash from a small business loan quickly. Many online lenders can approve applications in seconds, and even the slowest will usually process your application within 24 hours. You’ll usually get your money within two or three days, although many online lenders are able to put money in your account within minutes.
No matter how careful you are to run your business without taking on debt, there will come times when you need money to ease a cash flow problem or to seize a big opportunity. When those times arise, short-term business loans are the answer. You can get money fast, repay it quickly, and move on with your life.