Does Your Business Need a Short-Term Loan?


January 3, 2019

When life gives you lemons, sometimes you’re prepared to make lemonade and sometimes you don’t even know what to do with it. As a business owner, you’re not only dealing with personal challenges that inevitably come your way; you’ll also face the unexpected challenges of owning a business. It’s important to have a financial cushion as a safety net when certain situations arise.

Having a steady flow of cash should be your top priority. In fact, JPMorgan Chase proved understanding cash flow patterns and having a cash reserve are necessary for the survival of your small business. The extra cash not only covers emergencies and surprise expenses, but it can also help you take on unexpected growth opportunities.

If you don’t have an extra stash of cash to deal with whatever comes your way, there are other options you can take. A short-term business loan can help your business survive cash flow shortage and unplanned business events, as well as finance new growth opportunities.

However, short-term loans offer small funding amounts with high-interest rates (generally around 10% or higher). They also offer shorter repayment periods. Don’t be surprised when lenders ask you to pay back the loan on a weekly or daily basis.

Should you consider applying for a short-term loan?

Short-term loans are perfect when you’re dealing with unexpected situations. You can use the funds from a short-term loan to purchase new equipment, pay for unexpected bills, add inventory, or even on special business projects you can’t afford to miss. There are usually no restrictions on how you utilize the funds, as long as it’s for the growth of your business.

When applying for a short-term loan, the cost of capital is usually higher than long-term business loans, but you’ll receive the funds quicker. Short-term business loans are a good option for businesses that don’t qualify for traditional loans, have credit issues, and has at least two years of operation.

When used smartly, short-term loans help nail your business goals, improve credit history and score, and help you qualify for other types of financing in the future.

It’s easier to get approval when applying for short-term loans than long-term loans. If you have a solid business plan, then you’re most likely to qualify. Depending on the lender, they may ask you to secure your loan with collateral.

To figure out whether a short-term loan is right for your business, ask yourself the following questions:

  1. How much money do I need?
  2. Where will I use the loan?
  3. What does my credit history and profile look like?
  4. Is my business going to cover loan payments?
  5. Do I need the funds ASAP?

Still not sure? SMB Compass can help you determine whether a short-term loan is right for your business or not. We can help your business secure the best type of loan program your business needs for growth and expansion. You can contact us by phone at (646) 569-9496 or email us at info@smbcompass.com.