Everything You Need to Know About Short Term Business Loans
The business industry is unpredictable, and an urgent need for fast cash is a common problem. Short-term loans are a solution for sudden challenges in the business, such as working capital shortages. This article discusses everything you need to know about STB loans.
What is a short-term business loan?
A short term business loan is a loan intended to help your startup or established business cover its expenses and capital needs. These loans are paid off within a shorter period than a conventional business loan – usually a year or less. Long-term loans offered by traditional banks or lenders are often paid off within several years or even decades. However, short-term loans are less complicated and can take a few months to pay off with some lasting up to three years.
According to Lantern Credit, a short term business loan is the best option to help entrepreneurs sort out temporary cash flow problems. Every business may need additional cash, with seasonal businesses being the most affected by inconsistent cash flow since they make a huge portion of their annual income within a particular period. Short-term loans stabilize such businesses without the need for acquiring long-term options from financial institutions like banks and SBA loans.
What are some of the types of ST BL?
Short-term loans are better suited for some financing options though they are not limited to specific uses. Any loan repaid within a short period is considered a short-term loan. Here are a few types
Working capital loan
Working capital loans are typically smaller loans with a short-term repayment period. It requires consistent monthly payment and may not be ideal if your income is inconsistent.
Merchant cash advance
This is a short-term business loan that entrepreneurs repay with a small percentage of credit card sales. The remittances are based on sales, making it a favorable option for most business owners.
Invoice financing is an option for enterprises that have a buffer period between collecting payment and providing a service. It can finance your next job as you wait for payment for a previous job.
What are the common uses of it?
Given the nature of short-term business loans, they are the best option for bridging sudden cash flow shortages, short-term business expansion needs, and handling emergency costs. They are not meant to cover massive, significant financing problems like acquiring other businesses or purchasing real estate. Here are a few common uses.
Capital for startups
Short-term loans are essential for both startups and established businesses. Most entrepreneurs that don’t have the capital for their startups acquire short-term loans.
Short-term operational costs
A short-term loan covers any operational costs that need immediate attention. For example, if there is a sudden need to hire extra workers or purchase equipment to complete a task.
Emergency maintenance and repairs
Emergencies are common in business. For example, if your computer system crashes and your business cannot operate without it, short-term business loans can finance the repairs.
If you have new opportunities within your business, consider acquiring a short-term loan. Financial advisors can guide you through this lightning-fast process to boost your business or even consider a startup.