So, imagine this. You own a busy retail store. The holiday season is around the corner and you discover enormous water damage in your ceiling, and it’s leaking. Or, you are presented with a golden opportunity to cash in on a bulk deal from a manufacturer that has tremendous value. Unfortunately, you don’t have enough cash on hand to fix that leaky ceiling or capitalize on that great opportunity. Well, this is where a short-term business loan can help. Short-term business loans get you the money you need now and allow you to repay it over a short period of time with the profits you make.
These loans typically come in smaller amounts ($5,000 to $250,000) than long-term loans ($250,000 to $1 million or more). Short-term business loans carry repayment terms typically in the range of a few months to a year, maybe two. These loans have looser qualifications and can provide much needed fast cash in a very timely fashion. However, these loans generally have high borrowing costs; which is something to keep in mind if you are a business owner considering getting some quick extra working capital.
Long-term business loans have a much longer repayment period, such as between 5 and 15 years or MORE! These loans are usually used for purchases of businesses, real estate or debt refinancing. Qualification for these loans depends heavily on a business owners personal credit score and operating history. Or if they can provide collateral to back the loan.
Are Short-Term Loans Right for Your Business?
There are several different situations in which a short-term business loan could come in very handy, and maybe even save your business. Here are some:
For emergencies: Well, as the example used above comes in to play again, your ceiling takes on tremendous water damage and is leaking into your store. With the holidays approaching you’d want to get this damage fixed up in a timely manner. This is where a short-term loan could help your business. You could get the cash fast, repair the damage and then repay the loan over a short period of time. Not holding you to any lengthy contracts.
To purchase inventory: Keeping with the holiday example, demand will certainly grow around the holidays. Not only will demand grow, but you will be presented with manufacturing opportunities. Those opportunities are on deadlines, though. If you don’t have working capital for the abnormal demands of the holiday season, a short-term business loan is what you need.
To manage cash flow: Having an uneven cash flow is more common than you’d think. A lot of businesses are seasonal and need money to keep the lights on during those off-season months. Instead of running up much more expensive credit card debt or taking out a home equity loan to pay those bills, using a short-term business loan or business line of credit can help keep the business afloat.
To finance expansions: Using a short-term business loan, rather than a long-term loan, could be what you need if you don’t want to carry over the debt of hiring new employees or purchasing new equipment for years to come. By eliminating debt early, you reduce your financial risk and improve your company’s cash flow.
Short-term business loans can give you the cash you need to overcome cash flow shortfalls, assess emergencies and unexpected expenses, or fund small expansions. However, loans are not all created equal. There are plenty of loans out there available to you and you should go in there and compare the costs of each loan. You can figure out the cost by taking into the account the length of the repayment term and the APR. Once you’ve done that, you can then decide whether or not you can handle the payments.
Compare Loans Now!
Sprout is an online marketplace where businesses come to compare and save on small business loans. You go to www.SproutLending.com and simply fill out a profile or call us at 800-865-6057. Based on that information you provided, Sprout suggests the best matches depending on the amount and purpose of the business loan you are seeking. Last year, Sprout and it’s staff was responsible for over $100 million in loan approvals.
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