How to Get Short-Term Business Loans

Businesses need short-term loans in order to manage their cash flows when the going gets tough. Usually, the process occurs during a seasonal change where companies find it hard to maintain their expenses and hence need some sort of financing which does not require long term assurances.

The uses of a short-term loan vary from business to business. Some may need immediate cash to balance their books, while other need to simply buy inventory during an off-season, the payment of which can be made when the holiday period is over. Raising working capital or expanding the business may also be required, which forces many businesses to look for instant cash.

The duration of a short-term loan varies from weeks to months, and in some cases years, so one needs to meet the specific requirements of the lender in order to convince him that his money will be repaid accordingly.

Instructions

  • 1

    You need to be particular about the type of loan you require before going to a bank. Preferably, go to a bank or loan officer, with whom you have done business before. As in most loan cases, you need to have a strong credit history. Prepare your documents carefully and give all the necessary payment history to the lender, which includes the daily cash flow details, along with a comprehensive outlook regarding your dealings with the company’s suppliers (accounts payable). Apart from bank, there are certain credit unions and mutual lenders which can also help you out.

  • 2

    The time duration is an important consideration. Decide for how long you need the loan and when will you be able to pay it back. If you need money for a shorter duration, say a month, then the bank may not secure the loan with any collateral, but this will also depend on your credit history.

  • 3

    However, in some cases, the bank will want some assurance, irrespective of your credentials. In such instances, the collateral could be stocks, bonds, or any other company asset. If you need a loan for only a couple of weeks, the borrower could write a post-date cheque which includes the loan payment, plus some sort of additional fee. Make sure the cheque does not bounce as it will not only affect your rating, but further lead up to huge fees.

  • 4

    As a last resort, if still unconvinced, there are different lenders who offer loan online. However, according to Better Business Bureau, the authenticity is highly debatable, which ultimately leads to an even higher risk.

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