Short-term business loans are a practical solution for smaller purchases or ones that you can pay off quickly. When most people consider business financing they automatically think of long-term loans from the Small Business Administration or other traditional institutions. But depending on what you need it for, committing to a 5-10-year loan may not be the right move for your business. In this article, we walk you through how short-term loans work, which business situations they are most suited to, and how we can help.
What Is a Short-Term Business Loan?
Short-term business loans typically have a repayment term of one year or less. Unlike long-term financing that is repaid over several years (or sometimes decades), a short-term loan gets paid off very quickly. Usually, this is because it is for a smaller loan amount or serves a purpose that generates a quick return on the investment. Let’s look at the types of business situation that short-term business loans are most suited to.
What Can These Types of Loan Be Used For?
Short-term business loans are flexible and can be used for a wide range of needs. What really matters is how you intend to use the money and fund repayments – this may dictate whether long-term or short-term financing is more appropriate. If you need a large loan amount to expand your business into multiple locations or purchase expensive equipment, then you may be better off paying that back over several years instead of one. This would reduce the monthly payments and aid cash-flow during the repayment period.
However, if you need a smaller amount for equipment repairs or bridging seasonal cash flow gaps, then short-term business loans may be more practical. Repaying them quickly minimizes the amount of interest that is charged which can make them a more cost-efficient option. Here are some of the most common reasons that small business owners go for a short-term loan.
Paying for Urgent Repairs
Sometimes the unexpected happens – equipment breaks, gets stolen, or needs replacing without warning. If it’s essential to your business operations, then an issue like this can halt your revenue until it’s resolved. In these types of situation, looking at short-term business loans might be an appropriate solution. You can get access to the cash you need while you’re waiting for insurance payouts to be approved or just to get yourself up and running again quickly. If the cost of repairs or replacements is relatively small, then it makes sense to go for a short-term loan that you can pay off within a matter of months instead of unnecessarily committing to long-term financing.
Covering Start-Up Costs for a Project
There may be times when your business is awarded an exciting new project with big revenue potential, but you need to invest up-front in order to fulfill it. Perhaps you need to take on additional temporary staff or arrange extra equipment which you can invoice the customer for once the job is finished. In the meantime, looking at short-term business loans may help you bridge the gap. Knowing that you’ll recoup the cash within a matter of months, there’s no need to get a long-term loan when you can pay it off sooner.
Taking Advantage of an Investment Opportunity
Investment opportunities come in all shapes and sizes, but if you can see that you’ll recoup the money quickly then short-term business loans may help you take advantage. You might be offered the option to purchase stock at a discount and know that you can sell it on for a profit within 30 days. In a situation like this, it doesn’t make financial sense to take out a long-term loan when you can have a short-term one repaid within a month. You would be paying interest for years unnecessarily which could make the total cost significantly higher.
Bridging a Seasonal Gap in Cash Flow
Are there certain times of year when your business bank account looks a little empty? Short-term loans can help you to bridge the seasonal gap until business picks up and you can repay it in full. This ensures that you can keep operating during the slower periods and then take full advantage when things get busy.
Get Short-Term Business Loans When You Need Cash Quickly
Long-term bank loans from traditional financial institutions can take a long time to get approved. They often involve complex application processes and large amounts of paperwork which can delay you getting access to funding. If you need to move quickly and access the cash asap, then short-term business loans usually offer a faster application process. Choosing alternative lenders like United Business Funding can also speed up the process thanks to our streamlined approach. With our small business loans, you can access $10,000 to $2,000,000 in as little as 3 days!
Building Up Your Business Credit Score
Short-term business loans can also help you to build up your business credit score, enabling you to take advantage of a wider variety of funding options in the future. Many lenders will report back to the business credit bureaus which can demonstrate that you’re a reliable business operator that pays on time every month. Instead of relying on business credit cards or personal credit scores, this can help to build your profile quickly and may be especially beneficial for new start-ups.
Choosing the right type of loan will depend on your business situation and the funding purpose. Long-term financing makes sense for large amounts that will take years to repay but short-term business loans can work for most other purposes. If you need to pay for urgent repairs, cover project start-up costs, take advantage of an immediate opportunity, or bridge a seasonal cash flow gap, then a short-term option could work out cheaper overall. The important thing is to do your maths and calculate what the total cost of the loan will be over its entire lifetime, as well as how you will fund the repayments. This will give you a clear idea of whether it’s worth choosing a long-term or short-term loan for your business.
How We Can Help
United Business Funding offers short-term business loans that support organizations across the country. We can give you the capital you need, for today and tomorrow. While credit is a small factor, we approve your short-term business loan based on the current cash flow of your business – not years of financial history. Once funded, payback is made through a small, fixed daily or weekly payment from your business bank account. It’s that easy!
Our tailor-made packages are the ideal solution for established businesses or relatively new ventures. Unlike other lenders who require three years of trading history, we require your business to have been operating for a minimum of three months. We’ll take care of all aspects of finance, so you can focus on making your business a success. We can also help you with other areas of funding such as arranging lines of credit or equipment financing.
Get access to the working capital you need, even if you are dealing with less-than-perfect credit or have already been denied a bank loan. Whether you’re looking for a one-time cash infusion or have an ongoing need, your business opportunities can become a reality with United Business Funding.
Our hassle-free application process is fast and simple, with unrivaled support the whole way. CLICK HERE to learn more about our short-term business loans or call us FREE on 888-351-3863 to speak with one of our funding advisors today.