Why Choose A Short Term Loan
The simplest explanation of what a short-term loan is, is a loan that is repaid in less than 12 months or one year.
It is important to note that a short-term loan is going to have a higher interest rate than a longer-term loan because it often has more risk. This means your business must come up with the money in frequent repayments, normally a weekly or daily schedule. If your business does not deal with daily or weekly sales, this could be difficult.
A short term loan would be great for a seasonal business that needs to rapidly expand, but they get the majority of their cash throughout a single season. Think of a ski resort doing 75% of their revenue in the winter or a wildlife tour company doing the majority of their business in the summer.
Businesses like the above can’t wait several weeks for traditional funders like banks to make a decision because their revenue is generated within a shorter time frame. The delayed decision process could lead to lost opportunities. This is where a short term loan might be beneficial. If the business has a steady stream of cash flow and a solid history, they would be able to apply for an MCA or other short term loan with limited paperwork, which allows the whole process to be quick and efficient. This means they can expand on the opportunity quickly.
Many traditional funders like banks require your business to be tied to a certain term and have specific requirements on how you may use the cash. A lot of businesses choose alternative lenders and alternative funding solutions for this very reason. They want to grow their business, and the money might be used in several areas like payroll for temporary workers or perhaps on sprucing up a waiting area for customers.
Remember, there are many types of short term loans. There is a merchant cash advance (MCA ), a line of credit, invoice financing, and the actual ‘term loan’. Whatever you pick, read carefully. These types of funding deals are great for small business, but our suggestion is always to know what and why you need this type of loan and be educated about it.
Find out how your business can gain access to short term business funding with Cash Flow Capital today. Visit
or contact us on 087 720 1287.