Short-Term Business Loans
Debt Financing for Your Business and Short Term Working Capital Needs
Both debt and equity financing are widely used by the businesse. Business loans are given in the form of term loans. Those term loans may have short, intermediate or long maturities. The different lengths of maturities signify not only different time periods in which the client can repay the loans, but different purposes for the loans as well.
What are Short-Term Business Loans?
Businesses often need short-term loans instead of long-term debt financing. Such short-term loans usually have a maturity of up to one year or less, meaning that the client must repay the loan within the maturity period. Most short-term loans are often repaid much quicker than that, often within 3-4 months, in some cases even less than a month. Term loans with short maturities can help the business to meet an immediate need for financing without making a long term commitment.
Purposes of Short-Term Business Loans
Short-term loans are useful to businesses that are seasonal in nature. For example retail businesses which have to make invetory investments for specific retail period or season. Short-term loan enables the client to make necessary investments and repay the loan after the retail period or season. That is the perfect use for the short-term business loan.
Other purposes for short-term business loans are raising working capital to cover temporary liquidation needs in order to meet payrolls and other expenses, such as payment of bills or meet accounts to suppliers. The client may need a short-term loan also to even out the cash flow, particularly if the company is a cyclical business.
Qualifying for a Short-Term Loan
In order to qualify for a short-term loan, the client needs to present comprehensive documentation. We may ask a record of the client’s cash flow history back to one year, income statement for the same period, overview of servicing of other loans and payments to suppliers during the same period, information about tax debts and other information if deemed neccesary. All documentation should be in a professional format.
Client’s qualification for a short-term loan will help determine whether or not the loan will be secured by collateral or whether it will be an unsecured, or signature, loan.