Some Business Situations that Call for the Need to Secure a Short-Term Loans
From dealing with short-term cash shortages to expanding services and product lines, there are different reasons a small business can consider borrowing money. Still, businesses have to realize that not all kinds of loans are made equal. Before approaching a lender, you have to evaluate your reasons to pursue the loan and identify the kind of funding that suits your needs best.
A short-term loan is one option that offers you quantities of cash. You need to pay it back over a predetermined period. As with conventional loans, short-term loans require borrowers to pay interest on the principal advance, and often include a smaller amount of money and shorter repayment period. Indeed, the majority of short-term loans may have less than 1 year maturity, compared with long term loans which can last for many years.
Additionally, short-term loans are usually easier to get than conventional loans. Although bigger banks offer most of the conventional loans, people can get short-term loans from smaller lenders like credit unions and other financial institutions period this results in less stringent ending criteria.
Some business expense may not be appropriate for a short-term loan. As a matter of fact companies which secure short-term loans or long-term debt such as business acquisitions and real estate may experience severe financial troubles down the line. The following are some reasons a small business may wish to pursue a short-term loan.
Cash Flow Problems
When your business experiences an uneven or cyclical sales structure, a short-term loan may help resolve cash-flow shortages. For instance, a lot of new businesses find it hard to secure funding for expenses like supplier bills. A short-term loan allows a company to avoid running up its credit cards as they wait for its next revenue stream. In addition a short-term loan can be helpful in paying upcoming taxes so the company will not run into problems with the tax department.
A short-term loan allows a business to keep up with seasonal trends. A lot of businesses need additional capital and stuffing especially during the holiday season. With a short-term loan a business will be able to build up its inventory and cover the salaries of their temporary workers in preparation for the shopping rush in the holiday.
Companies may decide to expand. Whether you are expanding your service or product line or opening another store, you need upfront capital. And you can get this capital if you secure a short-term loan.
Regardless of how great your business insurance is, a situation may arise for which you may not be prepared. With a short-term loan your business can avoid going under when an equipment breakdown, your computer crashes or when there is a natural disaster.
Loans are capable of helping you take your business from startup to a successful one. But not all kinds of funding are equally useful. That is why it is imperative to review both the pros and cons of short-term loans so that you can decide whether this is right for you based upon the needs of your organization. Also, ensure you get the NumbersHelpline in case you get a loan from wonga and you have some issues with your loan.