Depending on your needs, issues, and financial situation, you’ll find that there is a wide variety of options for financing a business. From general business financing to disaster recovery loans, there are business loans for just about any purpose.
However, if you need access to quick capital for surprise expenses, you might have trouble finding a loan that meets your needs.
Short term business loans and business credit cards are two great alternatives to long term loans for small business owners.
Which one is right for you? Let’s take a closer look.
What are Short Term Business Loans?
Like any other business loan, short term business loans provide financing to businesses in order to help them fund business operations and new ventures.
When businesses are presented with surprise expenses, they often require immediate financing in order to keep their business afloat. Short term business loans give you access to quick financing to be repaid over a short period of time.
For example, say you run a manufacturing business in Ontario. Your business requires a lot of expensive manufacturing machinery. Each piece of equipment serves a vital purpose in the manufacturing process.
However, one piece of machinery breaks and is unrepairable. In order to continue your standard business operations, you need to replace the equipment as quickly as possible.
If you aren’t able to purchase the equipment with your own capital, a short term loan would give you quick access to the money you need to get back up and running.
Short Term Business Loans vs. Long Term Loans
Short term business loans and long term loans are similar in many respects.
In both cases, you’ll be given a predetermined lump sum of cash which you have to repay over a set amount of time with the given interest rate. Both types of loans can be used for just about any business-related expense.
However, the primary difference related to approval times and repayment periods.
Short term loans are generally a quick financing solution. They are often seen as an emergency source of financing. The application process is faster and you’ll generally receive your money faster than with long term loans.
Furthermore, short term loans usually have to be repaid in a shorter amount of time — often within two years.
What About Credit Cards
Business credit cards are another great solution for quick financing.
Business credit cards give you access to a revolving line of credit. You’ll be given a credit limit and, as long as you pay off your balance every month, you’ll have access to that amount of money on a revolving basis.
Additionally, you may be eligible for generous rewards.
As a result, credit cards can be a great resource for businesses that need access to financing on an immediate basis.
However, be careful to avoid accruing ongoing interest. Credit card interest rates are typically very high. If you don’t pay off your balance every month, you could potentially accrue a significant amount of debt.
Short Terms Business Loans: Are They Right for You?
Short term business loans are a great solution for any small business that:
- Needs money quickly
- Has poor credit
- Doesn’t want to endure long approval times
- Can repay the loan in a short period of time
If your business has immediate financing needs, a short term business loan is a perfect solution.
How to Get a Short Term Business Loan
Getting a short term business loan is similar to any other loan. You’ll need:
- Personal and business financial statements
- Spending plan
- Acceptable credit
- Low credit utilization
You’ll also need to be able to demonstrate your ability to pay back the loan. This may be done by providing documents related to business revenue and profits.
Know your options, find financing
Every business is susceptible to emergency expenses. Knowing your options will help you keep your business in good shape during these times. No two businesses are alike, and no two problems will be solved the same way, so make sure you research the loan that’s right for you.
Do you need access to quick financing? Apply for a short term business loan today.