Short-term business loans can give your business a large amount of cash to bridge the cash flow gap, handle emergencies, and fulfill other requirements. It means that you can borrow the amount you can quickly pay back in the given period.
Short-Term Loans for a Business are a type of financing that helps the business holders access the cash they want to cover their expenses, purchase equipment, buy inventory, or take advantage of any other excellent business opportunity.
There are various types of short-term business loans, and each has its characteristics. Similarly, you can get these loans from different companies, but BitX Funding is one of the best companies that offer all types of loans.
What are Short-Term Business Loans?
A short-term business loan is a loan that allows the business holder to cover the essential things of their business. It acts as emergency cash that the business owners can use to help their business to keep on running smoothly and efficiently.
Short-term business loans come with annual percentage rates as low as 3% and up to 50% or higher. Although, it varies on the type of financing and the borrower’s creditworthiness.
Common Short-Term Loans for Business include:
Business Term Loans
A business term loan is a traditional loan in that the borrower gets a large amount of money and then repays it over a set period. When the loan is entirely funded, the interest begins, and the borrower cannot re-access the funds once repaid. This is one of the excellent funding options if you need a lump sum of cash.
Merchant Cash Advance
Merchant Cash Advance gives business owners cash by giving the lender a portion of future sales receipts. The borrower must repay the money and the related fees from the individual sales of the business.
Under this loan option, the business owner borrowed an amount at a factor rate between 1.2 and 1.5. To repay the loan, the business must repay the advance amount with a set percentage of daily sales.
It can be a good option for a business with a high volume of sales and need immediate cash for their business without qualifying the things that are reunited in the traditional loan.
Invoice Factoring involves selling the business’s invoices to a third-party company and getting the 70% to 95% in exchange for the total invoice value. Thus, the factoring company becomes responsible for collecting the invoices and then paying back the business remaining invoices balance.
Thus, this financing can be an effective process to access the cash quickly without sitting idle for 2 to 3 months. For this reason, invoice factoring is a good strategy when you need short-term financing to help manage your cash flow.
Business Line of Credit
A Business Line of Credit allows the business owner to access an amount of cash as they need it quickly. The interest rates apply only to the portion of the loan that the business owners borrowed. Once you repay the funds, you can gain access again during the draw period. So, if you need cash on a required basis, this financing is the best for you.
Business Line of Credit is a good option for businesses that want to access cash on a needed basis, like unexpected things and expenses. Borrowing limits range from $2000 to $250,000 and come with APRs.
So, you can understand and read the terms of every loan before applying.
The Working of Short-Term Business Loans
Short-term business loans are like traditional bank loans, but their repayment period is short. This period ranges from three months to three years, but they are shorter than 12 months. But what makes them popular is that they come up with frequent payments.
Traditional loans come with installments you must repay monthly, but short-term loans require daily or weekly payments to stay current.
Because of this reason, Short Term Loans for a Business pose a higher risk of falling into a debt trap. On the other hand, the borrower is constantly refinancing a loan to delay any payment.
How Can you get Short-Term Business Loans?
The qualification process and the loan application vary from one to lender, but most banks and online lenders follow the same general guidelines.
To get s Short Term Loans for a Business, follow the steps:
Determine the type of loan
First, you need to know the requirement of your business and then determine the type of loan you want for your business. In addition, you must also evaluate how much you need to borrow because this can impact the loan type for which you are applying.
Understanding of Credit Profile
It will help if you keep in mind that your credit profile has a significant impact when you want to take a loan from the bank because lenders look for the borrower’s creditworthiness before giving them approval.
This credit score varies for every type of loan. For instance, you need a credit score of 630 if you want to qualify for a merchant cash advance.
Look for the Best Lenders
When applying for a loan, this is a crucial step in which you must look for the lenders offering those loans. This can streamline the application process because the banks usually have all the information. You can also search for other banks and online lenders, compare their fees, and choose the one that best suits you.
Collect your Documents
The requirements for the documents vary from one to another lender. Most banks and lenders require a solid business plan, personal and bank statements, tax returns for two years, and each detail about the business. The lender also demands copies of legal documents of your business and a complete description of how you will use the loan.
Submit a Loan Application
After collecting all the documents, please fill out the application and submit it to the lender. Make sure that you read the application thoroughly to avoid any future risks.
So, by following the step mentioned above, you can easily apply for short-term business loans.
Tips for Comparing Small Business Loans
These are the essential tips that you should consider while comparing these loans.
- Choose the method that how you want to receive your funds.
- Consider the repayment terms and flexibility.
- Look for additional fees.
- Check the lender’s customer’s reviews.
- These will help you to get a loan from a suitable lender.
Whenever you want to get a loan, look for the best company. There are various companies, but if you’re going to reduce the risk of any harm, you should choose BitX Funding. We are a well-recognized financial company with experts that offer you the best loan. We listen to your requirements and then suggest to you the loan you can repay in the given period.