Running a business brings with it challenges of its own – maintaining inventory, managing overheads and payroll can all be intimidating. In addition, you can’t put off some tough months wherein just maintaining a positive cash flow can seem impractical.
At times, the clear-cut solution to overcome hard times is to get a short-term loan that can assist you, the business owner, in maintaining stable operations. However, most of the loans that are accessible to business owners are for long-term. By the time the long-term loan is fully repaid, the interest alone is sufficient to shatter a business owner’s heart.
Actually, a long-term loan is not always the perfect solution for every type of business, thus, short-term loan options are critical, which can assist many business owners to get the loan money so that they can ensure their businesses run efficiently and flawlessly.
In-depth information on short-term business loans covering all the major aspects are mentioned below that you could read through, bookmark it for reading later, or hop to the part that catches your attention as per your preference.
WHAT IS A SHORT-TERM BUSINESS LOAN?
A short-term business loan is precisely what it expresses, “A loan that is repaid in a short period”. Evidently, what all qualifies as “short” is comparative, and this is where many borrowers can get perplexed. Keeping this in mind, we will throw some light on what we consider short-term loans to be like.
Start-ups and small businesses will often require short-term business loans rather than long-term business loans or debt financing. Short-term business loans normally have a maturity of one year or less, and it should be repaid to the lender within a year. A majority of short-term business loans need to be repaid sooner between 90 days and 120 days. Nevertheless, these short-term business loans can assist to fulfil an urgent need of yours for financing without requiring you to make a long-term commitment.
Short-term business loans are very useful to seasonal businesses, for instance, a retail business who need to accumulate inventory for the holiday or festive season. This type of a business might require a short-term business loan to buy stock in advance ahead of the approaching holidays; however, the business may not be able to repay the loan until the holidays are over. This is a fitting example for making good use of the short-term business loan.
Let’s Take Some More Examples:
- You may be anticipating your credit customers to pay off their outstanding bills, in the interim, you may require cash to operate, and thus, a short-term business loan can be helpful.
- A short-term business loan may be needed to fund operating capital to cover up temporary inadequacies in funds so that you can fulfil payrolls and other expenses.
- You may require short-term business loans to pay off your own bills, i.e. to fulfil your own Accounts Payable responsibilities.
Well, business is all about prospects and possibilities; at many times, we are ready for them, but on certain other occasions, events can unfold suddenly without any prior intimation. Short-term business loans are designed to serve businesses irrespective of the industry or its size. Numerous business owners are caught up, as they remain unprepared by the gradually changing business cycle and so they may miss or overlook many precious business prospects. Thus, short-term business loans are vital so that business owners can capitalise on all these business prospects. Short-term business loans are designed to make sure the best business lending is provided and the cash is given quickly.
HOW SHORT-TERM BUSINESS LOANS DIFFER FROM
LONG-TERM BUSINESS LOANS?
1. LONG-TERM BUSINESS LOANS
Long-term business loans are a type of funding alternative rendered by conventional lenders that are aimed at meeting more long-term financing requirements like acquiring another business or expanding your business over the period of many years. This kind of funding requires repayments term that extend for many years, sometimes continuing for 10 or even 20 years. These loan types often include added requisites such as collateral.
2. SHORT-TERM BUSINESS LOANS
Short-term business loans are designed to fulfil most urgent funding requirements. In case, small business needs to take advantage of an immediate new business opportunity or is coping with a sudden demand, a short-term business loan can provide quick, handy and flexible funding solution. These short-term business loans are provided by alternative lenders and they usually have less limiting loan requisites compared to conventional banks. This loan type facilitates business owners to get the funds they require without taking on bigger debt, which is for a longer term.
Finally, the funding option you select will depend on your unique business needs and how you plan to use the funds. For most of the small business owners, a short-term business loan is usually more fitting as it facilitates businesses to obtain their funds swiftly and start making it work for their business right away.
WHY IS SHORT-TERM BUSINESS LOAN NEEDED?
There are many financing options available to small business owners these days than ever before. Depending on the requirements of the small business, some loan alternatives may be more beneficial to others. As a business owner, you should have a clear understanding of the exact use of the loan, to be able to make the most appropriate loan decision that will assist any small business owner to decide the best financing option that will fulfil their business requirements better.
For instance, funding requirements for buying a heavy equipment piece or a new warehouse will probably need different terms than tiding over short-term cash flow gab or buying inventory. Similarly, it doesn’t make sound judgement to use long-term financing to fulfil short-term capital requirements.
Some valid reasons as to why a short-term business loan is required are enumerated as follows:
For many loan intents, a 5-year or 10-year loan can be prudent yet here are some very good scenarios of business financing needs that could better suit short-term loans.
1. SATISFY PROJECT’S SET UP COSTS
At times, setting up a new project needs more capital than what is accessible from cash flow. A short-term business loan could be ideal for meeting expenses, which can be recovered between 60 and 90 days.
2. EMERGENCY REPAIRS
To pay for the repairs on equipment that is vital to business operations is a valid reason for a short-term small business loan to aid operations to run smoothly without a 3-year or longer loan commitment.
3. BUYING INVENTORY AT DISCOUNTED RATES
It’s quite common for small business owners to look for fast access short-term financing to take benefit of a business opportunity. Buying inventory at discounted prices can be a valid reason for availing a short-term business loan.
4. RISING ABOVE A SEASONAL CASH-FLOW GAP
Most of the seasonal businesses, at times, need an extra inflow of capital to meet expenses while tiding over from one season to another, as long as the business keeps adequate cash flow to be able to make the periodic payments.
Usually, short-term financing will have a lower total cost, but will probably have an elevated periodic payment than a longer-term loan. These dynamics make it vital to know how that will affect your cash flow.
It is imperative to know how a small business can avert a cash flow crisis.
That’s why it is important to think about the purpose or use of the loan prior to searching for a loan – this will certainly help you to determine the loan type that best suits your business requirements. Although numerous business finance options are easily accessible, what will benefit to a particular business is not always evident. Make sure you have all the details that you will require to make a well-informed loan decision that includes knowing the total cost of the loan, loan term and interest rates. Besides, compare all the available loan options with regards to their interest rates and loan terms before finalising the loan. In addition, it’s critical that you know the precise answers to the following important questions:
- How much fund (capital) needs to be borrowed
- What loan-term would be prudent?
- Is a lender available in the nearby vicinity that specialises in the type of loan that I am looking for?
At the moment, it has become a big challenge for many business owners out there to access capital and the current backdrop of loan alternatives make it imperative for business owners to become shrewder (i.e. more calculative) about the loan choices so that they can succeed in selecting the ideal loan that perfectly fits to the requirements of their business.
Besides, you can avail short-term business loan from pawnbroker/ Pawn Shop when you urgently need some quick money for your working capital, and you’ll get the cash in your hand on the same day in a matter of minutes with no credit checks.
HOW CAN A SMALL BUSINESS BENEFIT FROM A
SHORT-TERM BUSINESS LOAN?
There are various situations where a small business may need some fast working capital, but short-term financing can be hard to get from banks or conventional lending organisations. Thanks to the alternative financing companies that have made it quite simple for small business to avail, the much-needed short-term business loan so that they can sail through the troubled times and keep growing.
Let’s have a look at how a small business can benefit from availing a short-term business loan:
1. PROVISION DURING EMERGENCIES
Just like in life, things can take place in business that might produce an emergency putting the life of your business at stake; for instance, damage due to a natural adversity, an equipment breakdown and so on. No doubt, your financial plan may have a provision to tackle such emergencies, but often they would not be adequate. Short-term financing can assist ease the recovery process, upholding the foundations of your business and helping to move ahead.
2. CRUISING THROUGH THE SLOW-PHASE
Most of the business may experience a busier period during one particular time of the year and a slow-phase during a certain period. The influence of a slow-phase or off-season may be bigger for businesses that survive solely on a seasonal business; for instance, many retailers are there who do maximum business during year-end or around Christmas. The operating capital of a small business can go for a toss when sales are down. During a momentary slow-phase, a short-term business loan can be of great assistance. It will not only help you to keep your business moving but also will aid in growing your business.
3. SUPPORT BUSINESS EXPANSION
During business expansion, short-term financing can render much-needed financial support and backing, easing the process and lowering any pressure involved.
WHAT ARE THE VARIOUS SOURCES OF AVAILING SHORT-TERM BUSINESS LOANS?
Ingenious different sources need to come up with a workable financing strategy to acquire financing for small businesses. Small business owners can obtain finance for their business through many different sources. Sources to obtain a short-term business loan can differ depending on the nature of the business, the anticipated ROI (return on investment) and the problems that may surface financially. To provide potential financiers with the nitty-gritty of your business plan, the scope of the project must be presented to them. Short-term business loans can be easy, quick and hassle-free depending on where you look to obtain the funding.
1. PERSONAL CREDIT CARDS
In the world of small business, business credit cards are quite common, but it is prudent to use personal credit card option instead. Personal credit cards are shielded by consumer protection compared to business credit cards. By and large, credit cards are inclined to have reduced interest rates and fees compared to merchant lending services.
If you select this alternative, it is imperative to keep the paper records in order. A small business owner must maintain detailed expense reports for all business purchases done using a personal credit card, to account for the funds being transferred out to pay off the bill.
2. PERSONAL SOURCES
Personal savings can be an excellent option for small business owners requiring access to cash in a very special situation. If your savings aren’t earning you enough interest sitting around as they could from being loaned to one’s own business then it can be a practical investment.
3. BANK LOANS
If a small business can qualify for a short-term bank loan, then they should go for it. As banks have access to the current and saving deposits, they have the cheapest money to loan.
The tight spot with bank loans is that you, as a business owner have to qualify their high requirements. Moreover, usually businesses are looking for such loans when their finances aren’t stable, that can be a barrier.
4. PAWN LOAN FROM THE PAWNBROKER/ PAWN SHOP
The pawnbroker can provide small business owners with an instant short-term business loan against any asset of value such as gold jewellery, machinery, equipment or vehicle collateral.
Acquiring a short-term loan from a Pawn Shop is easy, hassle-free and requires no background or credit checks. When all other options fail, you can rely on Pawn Shop to obtain the much-needed short-term business loan. Normally, you get the window of up to 90 days to repay the loan and interest; however, you can also extend the loan tenure by paying off any outstanding interest and advance interest for the extended month. The beauty of the pawn loan is that it won’t consider your financial condition or your credit history for providing you with an instant business loan for a short-term. Know how small businesses can get fast cash loan from a car pawnbroker.
Apart from the above key sources, there are several other options available. Therefore, what’s the most appropriate source to acquire a small business loan? Well, the answer can vary from one situation to another; nonetheless, a little introspection would be of great assistance before you decide. Small business owners can take advantage of the most fitting source to avail the short-term business loan for the right needs. With the access to quick cash, business owners can develop, fulfil their business objectives and keep on doing remarkable things for their customers.
HOW TO GET SHORT-TERM BUSINESS LOANS
WITH A HISTORY OF BAD CREDIT?
Bad credit occurs when an individual fails to honour his or her past credit agreements and so he or she is unable to get approval for new credit. To put it in simple words, an individual hasn’t paid his or her past credit liabilities on time. Banks often reject small-business loan applications due to a history of bad credit. Here are the top 5 reasons behind the small business loan rejections.
Business owners having an inferior credit score are considered high risk of defaulting on a loan. However, if you have a history of bad credit, there may be some funding alternatives still accessible to you. Alternative lenders such as pawnbrokers provide short-term business loans in Sydney without any credit checks to borrowers. Their pawn loans are based on collateral. Collateral can be an asset of value such as machinery, equipment, gold ornaments, vehicle or any other asset of value.
COMMON REASONS FOR HAVING A BAD CREDIT HISTORY ARE ENUMERATED AS FOLLOWS:
1. OUTSTANDING DEBTS
A company, sole trader or an individual wasn’t in a position to repay the money to the third party or organisation from whom the money was borrowed as a loan under a contract agreement.
2. LOAN DEFAULTED
The loan amount wasn’t paid by the sole trader, private individual or a company, either full or a certain part of the loan amount.
When the company or a person is unable to repay the debts that they owed to their creditors, then they get a legal status of Bankruptcy.
BAD CREDIT OR DECLARED INSOLVENT – CASH FAST LOANS CAN ASSIST WITH SECURED BAD CREDIT FINANCING IN SYDNEY
Especially for people who have a bad credit report, emergency bad credit loans without credit check would be extremely useful. Indeed, Pawn Shops are aware of people’s hardships to acquire a bank loan or a loan from any other conventional finance organisation. Thus, eyeing an opportunity in this area, pawnbrokers offer easy short-term loans with no credit check instantly. With Pawn Shop’s secured bad credit loans, borrowers get the opportunity to restore (rebuild) their credit profile as well.
- If you are employed or unemployed – it doesn’t matter at all.
- If you have a low credit score, bad credit history or bankruptcy – it doesn’t matter either.
You, the business owner can visit a Pawn Shop along with your second-hand asset of value (maintained well and in good condition) that you can use as collateral to avail the short-term business loan. Most of the pawnbrokers will just require proof of asset ownership and your identity to process your bad credit loan application and provide you with an instant short-term business loan.
HOW TO REPAY SHORT-TERM BUSINESS LOANS CONVENIENTLY?
In order to repay your short-term business loan with ease, it is imperative for you to budget and manage your funds properly. We have explained crucial steps on how to repay your short-term business loan conveniently underneath to assist you to budget and manage your money judiciously.
“Having a sound financial planning in place and maintaining a budget for it are the two sides of the same coin. That means both are equally important and required.”
- You should know what is your monthly income and monthly expenditure.
- It is recommended to make use of a simple spreadsheet or a budget-tracking program or an application in your Smartphone, as these can assist you and make your job a lot easier.
- It is important to balance your chequebook every week. In addition, make sure to identify if you meet the criteria for overdraft safeguard for your bank account. If you qualify, then sign up because the small monthly fee is welcome than the heftier fee if you’re ever evaluated for a bounced cheque.
- Evaluate your receipts on a week-to-week basis. This can assist you to detect your exact expenditure. Besides, it will let you know about your spending patterns and assist you to remove any shocks.
- Keep an eye on your tax withholding and keep on making required adjustments in an appropriate time interval because in case your withholding is less, you’ll be obliged to pay money in April.
- Find out essential expenditure and overestimate them by around fifteen percent so that you can get a margin if at all an error occurs. For instance, electricity, gas, water, insurance, food, transportation and phone bills fall under this category.
- Likewise, you need to plan your meals properly, as eating out frequently can become a big expense and this is one simple way to save money.
- Know your lender’s late payment policy. In case, you miss on a payment, you can at least make the payment during the grace period as per your lender’s late payment policy.
- If your payments become irregular or have stopped, keep your lender informed, as they don’t like to be left guessing and ultimately they will assume that you have defaulted your loan. Lenders are often ready to work out an alternate payment schedule if you communicate at the proper time and don’t make a habit of irregular payments.
- It is vital to set financial goals for yourself and accommodate it in your budget. Suppose, you are trying to pay off a short-term business loan, ensure that the goal and its payment amount are considered in your monthly planning and budgeting.
WHAT ARE THE MAJOR MYTHS
ABOUT SHORT-TERM BUSINESS LOANS?
When a small business is wading through troubled times, often short-term business loans from alternative lenders like Pawn Shops are an excellent option. Let’s look at the major myths that small business owners have about availing short-term business loans.
MYTH #1: IT IS HARD TO GET SHORT-TERM BUSINESS LOANS
While the process of applying for formal bank applications can be strenuous for a small business, you’ll find that alternative lenders like pawnbrokers take a much less exhaustive approach.
MYTH #2: EXCELLENT CREDIT HISTORY IS ESSENTIAL
Traditional banks follow very stringent credit policies and they will need your credit record to be stable; however, Pawn Shops offers an exceptional alternative for availing short-term business loans with no credit check.
MYTH #3: AS THE BANK WON’T PROCESS A SHORT-TERM BUSINESS LOAN, NOBODY ELSE WILL
Banks are driven by profits, so before considering a loan application, they will first evaluate what profit can be made out of the deal – naturally, on a shorter loan term, less profit can be made.
On the other hand, alternative lenders like pawnbrokers have the right expertise in lending for short-term, and they have shaped their business model around speed and cost-effectiveness, thus, the loan tenure does not have any significance to the success of an application.
With the alternative lending sector budding so rapidly, it has become easier for business owners to take out short-term business loans now than ever before. Better yet, a collateral based loan from pawnbrokers can provide speedy cash to small business owners in just a matter of minutes without any credit check. These alternate lending sources act as a true lifeline for small business owners facilitating them to cruise smoothly through hard times.