Small growing businesses will sooner or later need to secure additional funds to cover the growth and this is because of the increasing expansion expenses. However, it is not just a matter of immediately BORROWING money but to seriously plan what the loan is to be used for. This will help the borrower and the MONEY LENDER agree on the most ideal way to finance the loan. For small businesses, a short term loan may well suffice. Short term loans are ideal lending options for businesses that experience erratic income ups and downs, or to cover increasing expenses due to sudden expansion. One feature of short term loan is that it’s very easy to manage considering that repayment term are usually less than a year.
Short Term Loans are very Manageable
Short term loan for small and medium scale businesses are normally tied to the businesses immediate sales. They are easily done as long the business has a consistent and positive income flow. These types of loans are normally unsecured with any type of asset thereby making them a very high risk investment. Because of this the loan becomes quite costly, specifically in terms of interest rates, finance charges, fees and Annual Percentage Rate or APR. Other than this, short term loan are tailored fitted for businesses that will need extra or more capital for their short term inventory purchases and expansion. Short term loan are also a big help in controlling and managing erratic movements of business incomes.
Shorter Repayment Options
It must be understood that short term loans have more frequent repayment schemes than long term financing. The usual repayment terms for the loan are often taken from the company’s daily sales. In other short term loan agreement, repayment is required to be finished within 30 to 90 days. Unlike long term loan, the amortization amounts to be paid on short term loan are usually not fixed. Today, there are actually a variety of short terms financing model that businesses can opt for and they are Business Line of Credit; Merchant Cash Advances; and Accounts Receivable Financing.