How can short-term business loans benefit SMEs?
Short-term business loans can provide you with the finance your company needs. Perhaps you need a loan for cash flow purposes, or maybe you want to set your growth plans into action. Whatever the reason, this guide is designed to help you figure out whether a short-term business loan solution could benefit your SME.
What is a short-term business loan?
A short-term business loan agreement typically ranges from three months to two years. Anything over two years is considered long term. Businesses can typically access short-term loans for up £1million, however, the amount you can actually borrow will depend on your business’ financial health, how the lender operates, and what you’ll be using the loan for (i.e. what you’ll be spending the money on).
Short-term loans can be used for a range of purposes. Some common uses of short-term loan
- Business expansion
- Cash flow
- Bridging receivables
- Stock or machinery purchase
- Renovation / refurbishment
Pros of short-term loans:
1. You should receive your loan quickly
The most obvious benefit of a short-term business loan is that it can provide you with fast capital for your operations. In addition, a short-term business loan application is typically shorter than that of a traditional bank loan and requires less information. This can be incredibly useful if your business has bills that are due soon, and can’t afford to wait on a long approval process.
2. Easy to Qualify for
When compared to more traditional business financing options, most short-term business loans have remarkably high approval ratings. Even if your small business has a limited or poor credit history, you still could qualify for a short-term loan. The lender will still want to review both your personal credit and business credit scores, but their requirements probably won’t be as stringent if your score is good.
3. The Loan Application Process is Simple
As we previously mentioned, the application process for short-term financing is fast. In addition, it will likely be easy to complete. These loans require relatively little paperwork and the applications can usually be completed online. If you have any questions, be sure to contact the lender you’re applying with.
Choosing the right short-term business loan:
There are many different types of loans on offer and available exactly for your business may need. The different forms are each designed for a different purpose. Among the most common types of short-term loans are:
Merchant cash advances— MCAs are suited to businesses without many assets, but who have a good volume of card transactions every month, a merchant cash advance uses your card terminal to ‘secure’ lending. Lenders such as Merchant Money will be able to get you an offer for an MCA.
Invoice financing— Invoice finance is a method of borrowing money based on what a business’ customers owe; instead of waiting weeks for your invoices to be paid, the lender advances most of the value straight away. Lenders such as Bibby or Hitachi can offer great invoice finance loans.
Asset finance— Companies use asset finance to purchase or replace equipment-from computers to vehicles-by spreading the cost over a set period of time. Some asset finance lenders Funding Bay use includes Ultimate Finance or Close Brothers.
Payday Loans– 3Payday loans are a type of short term loan that can be obtained very easily. The ease of getting a payday loan involves the fact that the borrower will borrow what they need prior to their payday, and they will need to repay their loan and the interest involved when the payday comes. This type of loan is a great option for obtaining the money needed urgently, especially since it is easy to get.
Contact Funding Bay to find out which type of short-term finance is best suited for your business. Our team of experts knows the business finance world and we are in touch with hundreds of lenders in order to find the best loan for your situation.