Tips for Applying for a Business Short Term Loan

Does your business need a cash injection? Applying for a short term loan is a way to secure much-needed money when you are going through a cash crunch. It happens to every business, and if you are prepared to handle it, then you can survive and thrive. In today’s business climate, access to instant money can change a company’s opportunity’s in the market, allowing them to grow in a challenging economy.

However, short term loans do not suit all types of business financing. There are situations where you should avoid taking on the financial burden of a short term loan. Individual circumstances will vary, so when is it safe to use this financial facility and when is it a risk to financial health?

Here are five reasons why you should and should not procure a short term loan.

#1 Take a Loan If You Have no Credit Score

If you have just started your company, you may find it challenging to secure financing through traditional banking institutions. Banks do not like to make small loans to new businesses as they view them as a high default risk. However, some micro lenders are prepared to create loans for people with poor credit in return for a higher interest rate to mitigate the risk. By taking a shot term loan with a micro lender, you can improve your credit score and gain access to institutional loans in the future.

#2 Take a Loan If You Need Bridge Finance

Do you run a goods business that needs capital to procure stock? Do you struggle to balance your cash flow during the middle of the month? A short term loan can help you bridge the gap when finances get thin, allowing you to keep your business running smoothly without feeling the pinch of a weak cash flow position.

#3 Take a Loan If You Have a Seasonal Business

Do you run a seasonal business that is dependent on tourism? If you have the numbers to prove your yearly revenue, then you will be able to easily access a short-term loan to help you through the quiet times of the year.

#4 Take a Loan for A New Opportunity

Do you need quick cash for an instant business opportunity? Micro lenders are happy to help small business owners chase their dreams, and a short term loan can give you the capital you need to expand your business.

#5 Don Not Take a Short Term Loan if Your Business Finances are in Jeopardy

If your business is in serious financial jeopardy, then a short term loan is not going to save you. Speak to a lawyer or an accountant to help you see yourself through these trying times. Adding to your debt burden with a short term loan is a bad idea.

In Closing

A short term loan has many benefits for business owners in need of instant capital. However, they present risk to those that are in financial jeopardy. Make sure your intent to loan is evident before you commit to any paperwork. Short term loans are designed to be short term. So make sure that you can afford the payments terms and avoid late payment penalties or refinancing charges.