What are short term business loans?
Short term business loans are often given by lenders to businesses that need working capital over a period of three years or less. The most common type of short term business loans lasts for one year or less. There are certainly many uses of short term business loans, and at times may be a better option than traditional business loans.
When do businesses use short term business loans?
The business world will not always be smooth sailing, and businesses will have to deal with sudden unexpected emergencies that will require immediate attention. Short term business loans are best equipped for situations like these, as they are generally easier to apply for than traditional loans and it takes less time to obtain approval. Other common uses for short term business loans include: buying equipment, hiring/paying employees, and addressing cash flow needs.
Like all business loan options, a short term business loan will have its pros and cons. Here are some pros and cons to consider before applying for a short term business loan.
- Loan will be received quickly
- Easy to qualify for
- Simple application process
- High interest rates
- Frequent payment required
- Potential for significant debt
Applying for short term business loans
Like mentioned before, the application process for short term business loans is a simple one. When applying, it is important to consider information like credit score, bank statements, tax returns, and annual revenue. You can apply for one through a bank, or complete an online application through online vendors as well.
Short term business loans are useful in helping businesses pay for equipment, hire employees, and manage cash flows. These loans should be considered when looking to tackle short term needs. When applying, it is important to remember that interest rates will tend to be higher and payments will have to be made more frequently.