Short Term Loan
What is a Short Term Loan?
A short term loan acts like any other traditional loan. It is basically an amount you get which will be paid off over time. The fees typically include an interest and a processing fee. The repayment period, or loan tenor is relatively short.
Types of Short Term Loans
-Merchant Cash Advances
Lender has access to borrowers credit facility, percentage of borrower’s sales goes to lender
-Lines of Credit
Credit limit is set for borrower to access when needed. Monthly installment will be paid against to amount borrowed.
Loan done by using business’ accounts receivable
Pros of Short-Term Loan
- Bridge the project cashflow gap
- Emergency repairs
- Short-Term operational cost
- Purchase inventories
Things to look out for
These are some techniques to prevent a snowball debt and a few fail-safe solution:
- Short term loans are are not for risky business purchase
- Set aside enough cash from the profits to pay back monthly loans
- Research on potential consumers which will be interested in your upcoming project
- Look for last-resort buyers which purchases unused inventories
Why should we consider a Short Term Loan?
Short-term loans are used to overcome any unforeseen circumstances. Despite an issue with cash flow before the peak period, an unexpected call for additional expenses for supplies or emergency, or a sudden increase in demand for a service and product, a short-term loan solves all of it. Unlike any other loan there are no restrictions in using the funds. Due to digitisation, loans can be done online and approval are relatively quick. Also, despite shorter repayment term and low credit score, lenders are willing to take a higher risk to loan.