Imagine you have a small business, maybe a restaurant or an e-commerce company. You have just started out, and you need some initial capital to help you get on your feet. Or perhaps your business is seasonal, and you need to order your stock in time for the season to arrive, but you don’t have the money to do that since sales haven’t even started yet. What is to be done? The most common solution here would be short-term business loans. But what even are they?
What are short-term business loans?
As hinted before, short-term business loans are most commonly utilized by small businesses that do not have the financial means to deal with an emergency or a task that requires sudden payment or maybe an opportunity that simply cannot be let go. Either that or someone needs investment to start off business in the first place. The point is that there are numerous situations where someone may require a short-term business loan.
Short-term business loans are exactly what the word itself suggests; they are 24-hour short-term loans where your application is processed in only a matter of a few hours and where the loan is approved quickly, it also has to be returned in the same manner. Usually, these loans only mature up to a year, and even then, most businesses pay it back in 90-120 days.
The pros of short-term business loans:
As is observable, short-term business loans are extremely advantageous, but what are these advantages exactly?
Easy to qualify
The obtainment of short-term business loans is a process that is usually more informal compared to long-term financing. Even those with bad personal credit rating can obtain loans like these, which just shows how easy it is to qualify for them.
This is especially significant for businesses that are close to the brink of shutting down and have been refused a loan from all conventional banks. Short-term business loans are one way they can get on their feet again, and make enough money to pay back the loan. The requirements for these loans are extremely relaxed, and anyone can get them upon presenting proof of employment, some possessions or a valid checking account.
As implied before, loans like these are 24-hour short-term loans which means that they are obtained in only a few hours-hence, the reason why they are seeking to be the best option in case of an emergency. There are no huge piles of paperwork that have to be turned in, a few months’ worth of bank statements are enough. There is no extraordinary hassle, where you get caught up in a web of financial documents; everything is simple and easy to follow.
The cons of short-term business loans:
Unfortunately, short-term business loans do have their drawbacks despite all their advantages.
Higher interest rates
One of them is how compared to long-term loans; short-term loans have to be paid back at a much higher interest rate. Perhaps because with long-term loans the borrower takes much more time to pay back the loan and a higher interest rate wouldn’t really make sense in this case, other than convincing the individual not to borrow money in the first place.
Loans that are lent that fast do come with a price-the price being uncharacteristically high-interest rates. Other than that, the interest rate also fluctuates with your credit rating or your annual revenue which means that even if you did qualify despite a bad credit rating, you would still have to pay the premium for it.
As easy as it to obtain these short-term business loans, it can be extremely hard to pay them back. Loans like these are instant and therefore, require instant payment. To facilitate this, most lenders ask for weekly and in some cases, even daily payments. If your business is taking time to get started and produce significant revenue, these payments may be extremely hard to make, landing you in a cycle of debt.
If you still believe, however, that short-term business loans are what is best for your business, then it isn’t hard to find websites that offer the best business loans in Australia, especially the ones that are labelled as short-term cash loans which are always available readily.