A loan taken for a period of 60-90 days is considered a loan for short term. You can take a loan as an individual or a business owner. Usually the loaned money is a means to bridge daily expenses in your regular activities. The loan amount depends on your estimated amount needed for meeting all expenses. The approved loan amount can vary from the requested amount. There are many factors that govern the approved amount. Some of them are credit scores, financial standing and future prospects. Short term loans are offered by non banking financial institutions and small lenders.
Small businesses need money pump into their cash flow to meet daily operational activities. These short term loans enable businesses to bridge gaps between revenue inflows. The loan terms vary based on business client’s needs. For business loans, short terms may extend from 90 days to a period of 3 years. These loans are usually unsecured loans, which mean that the lender does not need to attach any collateral to the loan amount. Some may be secured loans based on the terms of loan approved by the lender. In secured loans, the lender may attach any item from the business like work in progress, inventory of finished goods, accounts receivable, property or equipments. The secured loans have a lower interest rate than unsecured loans.
To run a small business, these short term loans can be very helpful for sustenance of daily business if the owner is cash strapped temporarily. Getting short term loans is not difficult if the borrower or business owner has a running and active business with steady revenue generation. These short term loans can help businesses in their crunch times as there are no requirements to be fulfilled for loan approval. However borrowers should be cautious while borrowing. The business owner should read the fine print carefully and ensure that he/she understands the terms of the loan. These merchant loans come with a high APR (Annual percentage return) and can be a huge burden on the borrower if it is not paid on time.
These loans are valuable to businesses who can utilize this loaned money for investing in small strategies and earn high revenues. The business owner should find a loan officer and reputable lender whom he/she can trust to ensure good rates on the loan amount. An entrepreneur needs strong financial support to start a new business. It is not always possible for him/her to fund initial capital costs from personal sources. Short term loans are life savers in these situations. Short term loans are essential tools to ensure the coverage of start up costs of a new business. Sometimes for existing businesses short term loans help to bridge the gap caused due to the time lag in making payments to vendors and collecting payments from debtors.
Short term loans help to cover daily operational costs in a business. A business may need that extra cash to obtain equipment to complete an unfinished job or to promote seasonal products. The loans help to survive the rough weather patches in daily business activities. It is repaid as soon as the revenues into the business. There are no pre payment penalties for such loans.