What are short term business loans?


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Most businesses will need financing at some point. Business loans are commonly used to support growth, streamline operations, improve efficiency or, conversely, help businesses break through dead ends. There are many types of business loans. An increasingly popular type of financing is the short-term business loan.

In this article we will look at short term business loans, what they are and what they are used for.

What is a short term business loan?

A business loan (or business loan) is financing given to an individual, partnership, trust, or business for business, business, or investment purposes (rather than personal use). The reference to “short term” applies to the term of the loan – meaning that the loan will be repaid over a shorter term (typically two months to about two years). As with many business loans, online application is often possible, especially from non-bank lenders including fintechs, private lenders, and specialty lenders.

Now let’s take a look at a few scenarios where business owners might decide to go for a short term loan.

Short Term Loans Help Solve Cash Flow Problems

In times when a business is quiet – or just as exceptionally busy, cash flow can become problematic. Naturally, if the business is going through a quiet period, cash flow will not be as smooth or as normal. During particularly busy phases, while money may flow in more regularly, expenses may also increase and exceed the amount of money entering through the doors. Therefore, in either scenario, a short-term loan can help “smooth” cash flow.

Capital to start a business

Many startups need an injection of capital to start their operations. The good thing for start-ups is that there are many ways to get financing in the early stages of your business – including specialist lenders who have flexible lending criteria, require minimal documentation, and are known for provide funding quickly.

Money to pay a tax bill

Sometimes a business can receive a significantly higher tax bill than expected and funds are limited to cover expenses. In this scenario, a short-term business loan can provide relief without impacting operations, adding financial pressure, or depleting cash reserves.

Commercial loans for business expansion

A short-term business loan can be a good way to manage growth plans. When a business is doing well, it is natural to want to grow. This could take the form of buying new inventory and equipment, building larger business premises, buying another property to start a new branch of the business, etc. It all takes money: money the company may not have up front.

What to consider

Most businesses focus on the source of funding. What is arguably more important is the ability to repay the loan. This is also known as the “loan functionality”. Regardless of the amount and type of loan, it is essential to make sure that you have the means to repay the loan on time. Calculate the sales and profit the business needs to make to consistently pay off the loan on time – keeping in mind that life doesn’t always go as planned, so it’s wise to have a reserve. It is best to assess this together with an accountant. It is also important to make sure that the lender is credible and trustworthy. This can be assessed by looking at the terms and conditions and seeking the opinions of the lender, such as Mango Credit Notice.

In conclusion

There are a number of valid reasons for seeking short-term business financing, and we’ve covered some of the most common in this article. Short-term business loans are a fast and efficient way for businesses to get the money they need to support growth or help manage challenges.

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