Are Short-Term Business Loans Worth Exploring?

William Anderson

Small businesses do need access to cash. Without liquid capital, a small business would have an extremely difficult time properly running day-to-day operations. Cash flow and other revenue streams can and do assist greatly with liquidity. Unfortunately, cash flow and revenue pipelines may have their limits. When the proverbial well runs dry, a small business might find itself in a bit of trouble. An option does exist to get out of a cash crunch scenario. Short-term business loans provide a solution. The better the short-term loan offer is, the better the solution will be.

Emergency Funding

Are Short-Term Business Loans Worth Exploring?Short-term business loans are usually procured for the purpose of dealing with an emergency. When a business comes up with unexpected expenses, a short-term loan definitely can assist. A commercial gym, for example, might have to weight until monthly membership fees are charged and deposited by the billing service. If that date arrives on the 23rd and a major plumbing mishap occurs on the 10th, well, a loan would be a solid assist. The amount of time to repay the loan will vary depending upon different factors. A short-term loan could require repayment in as quick as a few months or as long as three years. Three years is still a relatively short amount of time to repay a loan when comparing the term to other lending options.

Best Short Term Loans

Often business owners assume that if they aren’t able to obtain funding from their bank, that they can’t get access to any capital at all. However, this couldn’t be further from the truth. With the advent of online lending, there are a plethora of different lenders who can offer the short-term funding that many businesses need. The various loan options each come with different application and qualification requirements. As such, it helps to examine which type of loans there are available on a short-term basis to help you make the best funding decision for your business needs.

Whether you are applying for a loan to cover supply purchases, to buy equipment, or to invest in inventory, having access to short-term capital is of vital importance. For newer businesses and startups, getting access to cash on hand can often make the difference between keeping the doors open and closing for good. With that in mind, it helps to learn about the various types of short-term loan options and how they can help you meet your business goals.

Are Short-Term Business Loans Worth Exploring?

Types of Short Term Loans

Invoice Financing Loans

A great short-term business loan for businesses that rely heavily on invoices is invoice financing loans. This type of short-term business loan is best suited for newer business to business (B2B) companies that provide a product or service. This type of business can get an invoice financing loan which is a loan against outstanding invoices that the business is waiting to have cleared. The invoices themselves act as a type of collateral to secure the loan. This type of loan requires that the lender advance the business a percentage of the total loan amount which tends to be around 85%. They then hold on to the remaining percentage that is left. While you are waiting for the customer to pay the invoice, you will be charged fees. After the client pays, you will have the remaining 15% back minus any fees incurred. Businesses with cash flow problems can benefit greatly from using this flexible short-term loan option to meet their funding needs.

Personal Loans

Personal loans are an often overlooked source of funding for many businesses. If you are in need of cash quickly, a personal loan for business use can provide the right solutions. Traditional banks in addition to online lenders both offer personal loans for use in business. The loans aren’t based on the business credit so it is important that your credit score is above 700 in order to qualify for a personal loan. Generally speaking, personal loans will usually cap out at $40,000 so if your business is in need of more funding than that, then you may wish to explore some other options. When obtaining a personal loan, it helps to be aware of what the interest rate will be. They can range from 6% all the way up to 36% on certain types of loans. This is largely dependent on the lender as well as on your qualifications.

Rollover for Business Startups (ROBS)

A Rollover for Business Startups (ROBS) loan is great if you are just starting a new enterprise and you have an eligible retirement account such as a 401(k). This type of loan lets you transfer your funds out of your retirement account without the need to pay early for a withdrawal penalty. This could be a risky option if you don’t have a solid business plan or if you are going into a less secure area of business. However, if you have a set retirement account and are looking for a reliable way to fund your own venture, this could offer the perfect solution.

Purchase Order Loans

Purchase order financing can be compared with invoice financing, however, the purchase order is what secures the loan instead of an invoice. When you choose this type of loan, you are able to get fast cash on hand without the wait. As a short-term funding option, it allows your business to quickly cover needed expenses such as payroll, overhead costs, and inventory purchases. Purchase order loans can work well for newer businesses that have a steady stream of different purchase orders coming in but lack the capital on hand to fulfill these orders. Purchase order financing works fairly easily. Once the business owner has the purchase order in hand, the lender will be able to directly pay the supplier to deliver the product to the customer. Once the delivery is accepted, the customer will pay the lender. The lender will then take away their fees and provide the business owner with the balance from what the customer owed. This type of loan can be a good option but business owners will need to factor in how merchandise returns may affect their ability to see any real return on investment from this loan type.

Business Line of Credit

Another popular option for getting short-term funding is to go with a business line of credit. A business line of credit is when a lender issues you funding in a specific amount that can be withdrawn from at any given time. Lines of credit are available as fixed lines or revolving credit lines. When you choose the revolving credit line option, the balance resets once you have paid it in full just like a credit card.

A business line of credit actually has many different advantages which makes it a great choice for many businesses. Some of the benefits of choosing a business line of credit are listed below:

Easier approval terms – A business line of credit is often much easier to qualify for than a standard term loan at a bank. This is one of the major reasons that many businesses opt for a business line of credit as one of their main sources of short-term financing.

Cash on demand – Another benefit of using a business line of credit is that you can have access to cash on demand. With this type of funding, cash on demand is available whenever you need it including to purchase inventory, materials, and supplies, or to pay for payroll. Filling gaps in revenue can be much easier when you have the necessary cash on demand to handle the fluctuations.

Lower interest rates – A business line of credit tends to have lower interest rates when compared to standard bank loans. This is one of the main reasons that many businesses opt for this type of financing when they have short-term funding needs.

Only pay interest after using funds – A short-term loan from a bank will require that you begin paying interest the moment that you receive the funds. However, with a business line of credit, you only pay interest once you start using the funds. This makes it a much more affordable loan in the long run.

Where to get a business line of credit?

If a business line of credit seems like a great option for you, then you may be wondering where to apply for one. Traditional banks and credit unions provide business lines of credit, however, they can be hard to qualify for. Online lenders also provide access to business lines of credit and they usually have more flexible loan terms. Here at Business Line of Credit Hub, you can apply for a loan through our website so that you can have access to the funding you need. We partner with only trusted lenders so you can be assured of getting the most affordable loan terms that are a match to your short term and long term financial goals.

Are Short-Term Business Loans Worth Exploring?

Concerns Over Short-Term Loans

Business owners do need to be mindful that short-term loans almost universally come with higher interest payments than long-term ones. Costly interest can — and will — impact the bottom line of a business. In particular, a business with a thin profit margin is could be driven into the red due to interest payments. Thankfully, short-term loans may be paid off ahead of schedule without penalty provided the terms allow for this approach. If so, then less interest ends up being paid. Small business owners should look into other options for financing if the short-term loan may prove to be too costly. A line of credit drawn from a checking account or even a simple credit card could do the job. Unfortunately, not every business has access to a line or credit. Current credit cards might be maxed out. For those dealing with such issues, a pivot to a special short-term business line of credit financier would be a better strategy.

Three Major Lenders

Kabbage, BlueVine, and Lending Club are three top names in the industry. All three can issue lines of credit for as low as a few thousand dollars and as high as $100,000. The criteria for being approved for a line of credit vary with each company. Bad credit borrowers may be fine with one company, but not approved at another. The speed in which funds are issued will vary as well. Potential borrowers should look over all three lenders to determine the most feasible option. Interest rates can be very high with all three lenders. As such, borrowing with a clear necessity or viable means of paying the loan back would be ill-advised.

How Can Business Line of Credit Hub Help?

Business Line of Credit Hub has the primary goal of connecting lenders with the entrepreneurs who need their help. We are passionate about assisting small businesses looking for trusted lending solutions from reputable online lenders. Through our easy to use online application portal, we made it easy to apply for the funding you need without the hassle. With a variety of different lenders available, you have a higher likelihood of being approved for the funding you need. Browse our website to read over the various articles we have made available on different types of short-term loans. Find the loan type that suits you best and then apply through our online portal to get the funding you need quickly. With Business Line of Credit Hub, you can receive access to a loan of up to $150,000.

Flexible Lending Terms

At Business Line of Credit Hub, we understand that every business is unique. Just because your business doesn’t fit the standard credit profile doesn’t mean you shouldn’t get access to the immediate funding your business requires. That is why we have partnered with lenders who offer flexible lending terms and approval terms so you have a better chance of getting the loan that can benefit your business. We offer access to lenders who provide business lines of credit for businesses across different industries. Whether your business is in retail, manufacturing, or the restaurant industry, we will help you get connected with the lenders that can help. Take the time to fill out the easy application form and select the best loan option for your needs.

William Anderson
Senior Business Consultant

William Anderson has been working with small business owners for the past 10 years. He got his start at an investment bank, but felt that he was too detached from where real people were making decisions that affected local economies. As a result, he took his experience and his MBA degree to work helping local small businesses.