Short term business loans can give your business the funds to grow quickly or take advantage of immediate opportunities. If you need working capital to invest in expansion, new equipment, or more capabilities, then short-term financing will help. It allows you to take advantage of revenue potential and then pay it back quickly. In this article, we look at the types of short term business loans available and how they can boost your bottom line.
What is a short term business loan?
A short term loan is defined as funding that has a term of 18 months or less. It’s borrowed and repaid over a small time period which means there’s no long-term obligation. Instead of committing for several years (as with longer types of loan), you repay the amount borrowed relatively quickly. This makes it ideal for covering costs that you expect to see a prompt return on such as seasonal stock, equipment repairs, or extra staff to fund a big project.
How can funding be used?
Short term business loans can be used for a number of different purposes. Some of the most common include:
- Paying for vital repairs – when equipment breaks or tools are stolen, it can stop your business from operating at full capacity. Business financing can be used to purchase the resources needed to get back on track.
- Bridging seasonal demand – if you have cash flow gaps due to the seasonality of your industry, then a short term loan can tide you over until the busy period returns.
- Developing more business – winning big projects often requires upfront investment in staff or supplies, so loans can help you secure these types of venture.
- Moving quickly – being agile is a powerful competitive advantage that small companies have over larger ones. Securing a fixed loan amount can help you take advantage of a profitable business opportunity as soon as it arises.
If you identify a short term business requirement that’s likely to generate returns within 1-2 years, then it may be worth borrowing money in order to maximize your gains.
Types of short term loans
There are various short term loan types available with different rates, terms, and repayment structures. They generally fall into one of three categories which have varying benefits and drawbacks.
Traditional loans have been around for years and are offered by well-known financial institutions. They don’t usually offer the most competitive interest rates or repayment terms, but they are backed by big names which give some business owners a sense of security. Applying for these loans typically involves a significant amount of time and paperwork, as well as a strong business credit history.
Loans from Online Lenders
Short term business loans from online lenders tend to have more preferential terms and interest rates. They are a newer form of financial institution which means they take advantage of digital technology to streamline processes. This makes applying a much quicker and simpler job – you’ll often get a decision within 24 hours. They don’t have the same strict lending criteria as banks so will consider a wider range of business types and situations for loan offers.
Quick Cash Loans
These are at the extreme end and should be avoided wherever possible. Fast cash loans target businesses that need speedy funding but have a bad credit history. They charge extremely high interest rates (sometimes 1000%) which makes them very difficult to pay back and can soon lead to a debt spiral. Quick cash loans are usually very short term – repayment is expected within 30 to 60 days, which often isn’t long enough to generate a return. However, they prey on small business owners who feel like their options are limited due to poor credit scores, so it’s important to be aware of how they operate.
What is the interest on short term loans?
The interest on short term loans usually ranges from 4% to 12% APR. Although interest rates can sometimes for higher for short term business loans than longer ones, they often end up costing you less overall. This is because they have a shorter repayment period so the interest only accumulates for months rather than years. In order to work out the total cost, it’s worth using a loan calculator to see how much you’ll repay overall rather than just looking at APR.
Why Strategic Capital?
We offer low-cost term loans to help accelerate your business growth. With terms ranging from 1-5 years and rates starting at 5.49% APR, you get peace of mind knowing you can focus solely on your business instead of worrying about costly repayments. Funding to your business checking account can happen in as fast as 4-7 business days from the moment you apply. A stellar credit history is not required to qualify, there are no checks to write, and no personal collateral is needed! All we ask is that your business has been operating for 2 years, generates $20,000 in revenue per month and that you have a personal credit score of 650.
Short Term Business Loans From Strategic Capital
Strategic Capital provides business finance to a wide range of organizations across the USA. Whether it’s to pay for your everyday costs, emergency repairs to equipment, or investing in expansion, we offer small business finance solutions without the hassle of traditional banks. Best of all, you’ll benefit from competitive terms and a simple application process, so you’ll soon have more money to reinvest into your business.
Transparency, innovation, and expertise are the driving factors behind everything we do. With a talented team of advisors, a plethora of funding partners, and the best technology available – we go above and beyond to help our clients receive their capital rapidly with the industry’s most competitive repayment options and interest rates. We want to break speed records, not bank accounts. Upon submitting your application, it’s reviewed by a dedicated Capital Advisor. We generate the best rates and terms at lightning speed through our funding matrix and robust lender network. Yep… it’s that simple. We offer short and long term small business loans, business line of credit services, and invoice financing. Learn more about the funding options we offer here.
– Bradley Keys
Checking for pre-approval will not affect your credit score.