It doesn’t matter if you are a startup or you are a bigger business in a slow business cycle there comes a point that you will need to have access to cash flow.
Short-term business loans can be beneficial during growth periods and down cycles. If you know that taking on a loan will quickly put you on track and in a position to pay back the loan, a short-term loan may be the right solution.
Nerdwallet has a great article on where you can find a short-term business loans. It has some great suggestions, not only on places to find loans, but on what to look for in a short-term loan:
These loans and lines of credit typically come in amounts from $5,000 to $250,000, carry short repayment terms of a few months to several years, have looser qualifications than long-term loans and provide cash quickly.
Repaying a short-term business loan on time can help you qualify for a long-term business loan in the future. Long-term loans typically come in amounts from $250,000 to $1 million or more, are less expensive and have a repayment period of five to 15 years or longer, making them better suited to a real estate purchase, business acquisition or debt refinancing.
The article also covers some of the pit falls of Short-term business loans:
Higher cost: They typically carry a higher APR — the total annual cost of borrowing, including all fees and interest — than long-term loans. That’s due to their shorter repayment period, faster funding, looser qualifications (lower credit score and revenue requirements) and the fact that many are unsecured business loans, which don’t require collateral.
More frequent repayments: Lenders may require you to make loan payments daily or weekly as opposed to monthly. Although these payments are smaller, they can be an issue for businesses that have uneven sales or those that don’t always hold much cash in a bank account.
Risk of debt trap: The speed and ease of short-term business loans can become addictive. Instead of repaying the debt in full, business owners may be enticed to refinance and roll over the debt into a new loan. But this can result in a debt trap: continual refinancing just to keep up with payments.
Read the full article here.
