You have prepared an excellent business plan and you’re excited for the opening day. But do you have access to short-term business loans to get through the first three months? If you’re still in the process of introducing your brand, building baseline customers and testing the waters, you need all the funds you can get especially during the first 90 days when you can incur more than the expenses you expect.
Business cost is multi-dimensional. You need funds to run the business and at the same time, provide for your family’s living expenses. Cash flow is essential at this stage and arranging the money from loans would be a very practical solution. To acquire funds for a smaller period, you may want to consider applying for short term loans.
Below are some the practical benefits of short term loans for business:
Convenience
While banks have strict eligibility requirements for business loans, there are various financing companies like ALC Commercial that offers easy to apply and quick approval loans. You can obtain the working capital you need and use it until your business gains traction. You only need to pay the set amount of cash in installments. So, if you need instant money for your inventory or to tackle urgent business expenses, you can use this easy financing approach. There is no need to line up in banks and traditional financial institutions that offer these loans through a traditional and strict sense. You can secure financing from private lenders that provides easy accessibility, instant approval and low documentary requirements.
Suitability to Modern Business Needs
The rise of modern technology, social media integration and changing consumer demands increased the challenges of modern businesses. While entrepreneurs are struggling to adapt to these challenges, the struggle to cover basic expenses don’t falter in the midst of financial difficulties. The source of credit must be quick to reduce the stress of running the business. You may need it so you can make quick decisions not only in procuring raw materials but in the delivery of finished goods or services to the market. You may not have immediate return on investments so it will worthwhile to tap into available financial resources to pay rent, clear dues and expand the business.
Credit Score Lenience
Businesses struggling with poor credit issues may not be able to obtain loans from banks. While it is advisable to opt for long terms loans to help improve the credit score because of low monthly repayments, among others—short term loans can help you clear off defaults and boost your credit score with timely payments. As you keep up with your monthly dues, your credit score will increase in a span of months. With a higher credit rating, you may already qualify for loans with low interest rates and better terms.
Low Interest Rates
It may seem that long-term loans have low interest. But, that is not the case at all times. You may have low monthly dues, but when you compute the total cost of the loan, including late penalties and additional charges, it could double or triple the principal amount of loan. If you take a good look at the rate of interest and the APR of a short term loan, you may realize that the interest is primarily charged on the principal amount.
When you are borrowing $100,000 at 12% interest payable within 3 months, you may think that the dues are too high. But, if you consider the actual break down of fees, the cost of the loan may not be too high, after all. For this reason, it is imperative to understand the nature of a short term loan—you need the money quick and you pledge your ability to repay it as quickly as possible. It is also advisable to work only with a reputable lending company that helps you at times when it becomes tough to keep up with your payments. In so doing, you can avoid paying hefty interest and jeopardizing your business by spending more than you actually earn.
Before you sign up for a loan, assess your needs and your capacity to repay. There are times that you may need to obtain long term loans that you can settle in extended period and secure with collateral to obtain higher amount. What is important is that you understand how to benefit more from the financial transaction. If the terms are not suitable for you, then choose a shorter term loan that is usually processed within 24 hours and payable in a month or within a year.
Short term business loans are good for entrepreneurs who are starting out in business and need quick access to funds. But, be careful in whom you borrow money; weigh the pros and cons of obtaining a loan before you decide to access financing options.