What is Short Term Business Loan and Things to Know About It

Money plays a crucial role in your entrepreneurial journey. It keeps your operations going and lets you grab every business opportunity that comes your way. If you are planning to embark on a new business venture or already running a business, it is imperative to know everything about short term loans, and ways to grow your business.

Business owners often resort to short term business loan to get through uncertain financial hurdles. It provides them working capital to overcome financial difficulties, encash business opportunities, pay off higher-interest debt, enable seasonal purchasing, source initial start-up funding, pay for newly launched advertising campaigns, etc.

Short term business finance can be immensely useful, so let us know more about it before you apply for one.

What is a short term buasiness loan?

As the name suggests, a short term business loan involves borrowing money for your business for a short period of time. You are expected to repay the loan amount over a few months or a couple of years. It is a business loan that provides immediate working capital to your business.

Short-term loans are different from long term loans. The sum borrowed in case of short term loans are relatively small as compared to long term loans, making them easily accessible to business owners. Also, long term loans can be repaid over a longer term, which is not the case with short term loans.

According to a study, lack of capital is the major challenge for 19% small business owners and about 82% of businesses fail due to improper management of cash flow. A short term loan helps circumvent such issues before they turn into a severe problem for the business.

Popular reasons to opt for a short term business loan

  • Cover start-up cost

Every business needs initial capital to begin operations. A short term loan helps you pay for the initial project cost which can be recovered within no time.

  • Address cash flow problems

If you are struggling to arrange working capital, pay off bills and arrange funds to run day-to-day operations of your business, a short term loan can be a great source of funds.

  • Purchase inventory

A short term loan helps you purchase inventory to keep up with the demand especially if your business is seasonal in nature. You can take a loan before the season begins and pay it off after the season ends, with the proceeds you receive from the seasonal sales.

  • Uninterrupted operations

A short term business loan helps you pay for the emergency repair of your critical equipment, which is necessary to run your business operations without the burden of the longer loan obligation.

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Things to keep in mind before applying for a short term business loan


  • Ascertain the purpose

Be clear about the purpose of your loan, whether it is to expand your supplier network, to hire a new talent or to invest in new technology. A clear purpose can help you utilise the funds in the right direction.

  • Weigh the risk

Carefully calculate all the possible risks before you apply for a loan. Ask yourself questions like; will the loan be beneficial for your business? Will you be able to repay on a regular basis? Will it generate cash flow? The answer to these questions wicanll help you identify all possible risks associated with borrowing a loan.

  • Maintain healthy credit score

Lenders check your credit score and credit history before lending you a short term loan. The higher your credit score, the better are your chances of getting a quick approvale, thus securing a lower interest rate. Hence, it is advisable to maintain a healthy credit score before you apply for a loan.

  • Choose repayment tenure wisely

Once you have decided to apply for a loan, decide on your repayment tenure. Consider all factors like emergencies, liquidity issues, risks, etc. before you choose your loan tenure. It is advisable to opt for a longer tenure than a shorter one.

  • Ascertain the total cost of the loan

It is important to understand the entire cost of the loan before applying for it. Consider charges or fees and the interest rate that your lender may levy. Different lenders offer different interest rates, therefore identify the most beneficial option to secure short term business finance. You can look at Bajaj Finserv that offers business loans at attractive interest rates reducing the overall cost of your loan.

Short term loans are easier to obtain as they have lesser qualifying requirements and paperwork. Bajaj Finserv offers multiple unsecured business loans such as working capital loan, SME and MSME loan for your varying business needs. With simple eligibility criteria and minimum documentation, you can avail a short term business loan within no time. You can take advantage of the pre-approved offers by Bajaj Finserv and get your loan approved in an instant.

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