The Benefits of Short-Term Business Loans

No matter how well a company performs, it might face times when cash flow becomes challenging to manage. Payments remain due until the outstanding receivables arrive. During such times, continuing smooth business operations becomes an uphill task. Although challenges are unique to each business, covering the costs to overcome them is a part of every enterprise. While small businesses have plenty of financing options, many turn to quick cash funding by applying for a business loan online.

Short-term business loans pose several additional benefits for SME owners, some of which we will discuss in this article.

Easy Application Process

Many lending institutions have easy and quick application procedures for online business loan applications. It allows entrepreneurs to apply for a short-term business loan online loan in as little time as possible. Unlike traditional lending institutions, aspiring borrowers no longer need to spend days scheduling meetings and putting together the required documents. Now, applicants can complete the application in a few minutes, all from the comfort of their own home or office.

Faster Processing than Traditional Lending

Thanks to new-age lending institutions like Clix Capital, businesses can get short-term loans approved quickly after applying for a business loan online. Once approved, the loan amount gets instantly disbursed into the applicant’s nominated bank account. Other traditional loans take several days, even weeks, to get approved, delaying the receipt of necessary funds on time. Late funds cause stress for business owners and leave them vulnerable while waiting for the much-required cash.

Short-Term Loan Flexibility

Short-term business loans are also known to be flexible funding options, particularly because they are customisable to suit individual borrowers in several ways. Regarding repayment terms, repayment options, end-usage, and interest rates, loan providers determine these factors based on each applicant’s eligibility, business performance, vintage, and credit history.

For instance, while an applicant can repay a business loan in 12 to 36 months, many borrowers choose to repay the entire loan in their convenient repayment tenure. They use a business loan calculator to find EMIs for various loan terms and select one with budget-friendly repayments. Moreover, business loans are also flexible in terms of usage. Whether a business requires funds for marketing, expansion, working capital, or staff hire, financiers have no say in the loan usage with no share in profits.

Cost-Efficiency

Short-term SME loans are potentially more cost-efficient than other financing options in the long run. Although these unsecured loans have higher interest rates than secured ones, their short repayment schedule produces the most cost-effective repayments by the term’s end. On the contrary, business loans with longer repayment periods have significantly high loan costs than short-term loans.

Minimal Impact of Seasonal Changes

Irrespective of the industry the business belongs to, it is likely to experience seasonal fluctuations at one point or another. While these might be minor ups and downs, they can dramatically affect earnings. So, the entire business may sink if it does not have access to external cash sources. That is when a short-term business loan comes in handy. It provides a quick cash inflow and a financial backup plan for these uncertain times.

Efficient Capital Management

Whether a business is just a couple of years old or ten, it must keep things ready and need capital to move to the next level. Many SME owners have limited money accessible at all times. That is why most of them seek a small business loan when they need funds to grow or expand their operations. Entrepreneurs can use the funding from a small loan to invest in various expenses, like equipment, marketing, inventory, staff wages, and other day-to-day expenses.

Safety Net for Emergencies

As mentioned earlier, seasonal fluctuations are common for small businesses, leading to times of less income and slow business. There are times when unpredictable emergencies occur, leaving the company owners blindsided and needing immediate funds to tackle the situation. Since a short-term business loan takes less time to obtain, they are easy and quick ways to get the financial safety net when things turn unfavourable. Business owners can prevent a bad situation from ruining the business they worked so hard to build.

Easier Eligibility Requirements

Most NBFCs offering small business loans have simpler eligibility requirements than traditional funding sources. Eligibility conditions often include the applicant’s age, business turnover and performance, business vintage, and credit history. Sometimes, applicants can obtain the required funding with as little as an ITR, proof of ownership, address proof, identity proof, and financial documents. Opt for a loan that does not require collateral to be pledged for a loan. These days, many NBFCs are more forgiving of low credit scores than traditional financial institutions, meaning new entrepreneurs with decent credit can get easy approval for business financing.

Minimal Time in Debt

The repayment duration with traditional business finance usually starts at three years. On the other hand, borrowers can generally repay short-term business loans in 12 to 36 months. A shorter repayment term means less interest cost paid over the loan term. Timely repayments help pay off the loan faster and improve the credit rating quickly.

Tips to Make the Most of Business Loans

Here are some tips for entrepreneurs that will help them make the most of their business loan:

• Know the Purpose of Seeking a Loan: Have a clear purpose for seeking a loan for business. Whether the goal is to fund growth, make new acquisitions, or build working capital, weigh the pros and cons of taking a loan and borrow accordingly.
• Decide on an Adequate Loan Amount: New businesses often need time to capture the market and generate cash flows. So, aspiring borrowers must evaluate the expenses to decide on a loan amount rather than under or over-borrowing.
• Pick the Right Lending Institution: Always compare the funding options from different lending institutions and choose one that best suits the business requirements.
• Understand the Loan Cost: Apart from the interest rate, borrowers must pay several other charges during the loan tenure. Enquire about these costs and keep them minimum to save money.

Efficient financial management is crucial for any business’s success. Have you decided to apply for a short-term business loan for SME? Avail with favourable terms and conditions and let your SME grow in scale. Weigh the pros and cons before applying for a business loan Online to ensure optimum utilisation of funds.