A short-term loan is a business capital loan that can provide your company with quick working capital. Like most other bank loans, you’ll receive a lump sum of cash upfront, which they repay to your short-term lender over 3 to 18 months. In addition to the principal amount you borrowed, your payments also include any lender fees and interest as part of the total cost of the loan. The right short-term financing can make or break a company. According to a study National Small Business Association conducted, 19% of small business owners cite lack of available capital as the biggest challenge in their future growth, and 82% of businesses fail because of cash flow management issues. A short-term loan could help circumvent these issues before they become a real problem for your business. Short-term business loans are outstanding for producing a fast return on investment as the cost of capital is high vs. using the funds for something that will take time to earn a return.
Get Your Paperwork Started Now
Start by pulling together commonly required documentation. Most lenders request personal identification, a voided business check, personal tax returns, proof of ownership, and bank statements. The more organized you are, the better. Preparing your information in advance won’t slow down the approval time trying to dig up old records. This is especially important if you’re using the loan funds for something time-sensitive.
Demonstrate Ability to Pay
When evaluating your loan application, a short-term lender will pay close attention to your revenue numbers. They likely want at least $7,000 regularly deposited monthly into your business account. But they won’t just look at the last month or two; regularity is also a factor. You’ll need to meet their revenue standards for at least the five months following your application. They also consider your financial stability and look for a positive account balance to ensure you can make your payments on time. While lenders do allow for negative account balances, they limit the number you can have.
Have an OK Credit Score
Although lenders check your credit score, the required minimum can be as low as 550. Check your score at NAV. Of course, the better your credit score, the better the short-term loan interest rate you’ll qualify for, so it’s still essential to maintain a healthy credit history.
Keep Credit Utilization Low
In addition to your credit score, the lender also looks at your personal and business debt load. If either is already too high, they might be hesitant to extend any new credit.
Be Prepared
Finally, in addition to reviewing your financial documents, lenders will also ask about the overall health of your business. When applying for business work capital, it’s best to anticipate their questions and prepare answers ahead of time. For example, a lender might ask whether you could repay the loan if your business failed. Alternatively, they might also want to hear your thoughts on the future of your industry. A little preparation goes a long way in the loan application process.
BitX Funding is an online marketplace for small business owners looking to fund a project. We specialize in connecting small business owners with lenders who will compete for your business. We believe small business owners drive the economy and are passionate about helping your company reach its full potential.
You can reach a loan specialist toll-free at 1-800-824-2407 or email at [email protected], or apply online here, and we can guide you on which loan is the best fit for your business.
