Running a business successfully means wearing many hats. One moment you're the hiring manager. The next moment you're making financial decisions.
It's not easy. It's well known that 50% of businesses fail within their first five years.
The reasons why they fail vary. Some don't have the right team. Others fail to outperform their competition.
29% fail because they lack enough cash to continue doing business. However, if business owners knew short-term business loans were available, that number could be reduced.
But short-term business loans do more than that. They help you gain capital. Keep reading to learn how!
There's No Lengthy Process
The speed of business moves fast. Especially with all the technological advantages that we have at our disposal today.
Sometimes, there's an opportunity in a business that requires a fair amount of capital upfront. 46% of small businesses don't have an excess of capital sitting around in their bank accounts waiting for this type of an opportunity.
Instead, they need to find other resources such as short-term business loans to help them raise the capital they need in a short period of time. Most loans require a lengthy application and approval process.
Only 39% of applicants receive their loan. The rest are rejected, often without knowing why.
Short-term business loans often provide money to the business within the same day of applying.
No Need for Collateral
It's tough for small businesses to receive business loans even when they have great credit. That's because they often don't have enough collateral.
With short-term business loans, there's no need for collateral. Many of them are unsecured which means you don't need to provide something upfront in order to be approved.
There are even opportunities for those businesses with less than ideal credit to obtain a loan. Sometimes direct lenders are willing to work with them despite their financial difficulties.
You're Still the Main Decision Maker
Sometimes a business finds itself in a situation where it needs capital quick. One solution is to work with investors.
However, equity investors will only provide the business with money if you're willing to exchange a portion of your company's ownership. Often, it's a large portion you'll have to part with in order to receive the funds.
With a short-term business loan, as long as you make your payments to the lenders in a timely manner, you owe the financial institution nothing else. This means you retain full ownership of your business and all its business decisions.
For those who aren't willing to give up their power, this is a smarter and more ideal way to raise capital.
You Can Prepare for Emergencies
Bad things happen. You could become injured or sick and be unable to work.
An employee is injured on the job and sues your company. There's a major equipment failure and without proper funding, your business will go under.
Every business should prepare for unexpected financial emergencies. This is so they have some idea on how and where they can raise capital quickly and easily.
A short-term business loan is also helpful for companies with large amounts of fixed assets. If you are struggling to keep up with your monthly bills, this is a great way to reduce pressure on your company while avoiding late payments to creditors.
That way, you'll retain your employees, your good credit, your business, and your sanity.
You Can Obtain New Assets
Short-term business loans are perfect for companies looking to obtain new assets. The loan can be used for anything.
It can be used to buy new equipment or property to help your business expand. As long as it's business related, you're free to use your capital as you wish.
The Types of Short-Term Business Loans
There are several types of short-term business loans to choose from. They each vary based on how much money they're willing to lend and for what purpose.
Let's take a look at them.
Having the right kind of equipment matters. You can't run a successful business if you're using computers and servers that are over five years old. If you own a bakery and an oven goes on the fritz, you're forced to either buy a new one immediately or go out of business.
With an equipment financing loan, you can receive as much as 100% of the equipment value. Most payments are calculated based on the expected lifespan of the purchase.
Personal Loan for Business
Sometimes you find yourself in a business situation where you do possess existing capital but you still need extra cash to make a purchase. A personal loan is perfect in this situation.
As long as your financial needs aren't over $35,000 to $50,000, these types of short-term business loans help you make necessary business purchasing decisions.
A short-term loan works best if you require less than $150,000 and you need it fast.
But beware. Short-term loans not only give you the money you need quickly (often within 24 hours). It's also expected that they get paid back quickly.
The payback period is based on the value of the loan and typically ranges between 2 weeks and 12 months.
An SBA loan is a Small Business Administration loan. It's the most popular and most common type of loan available.
You can use this type of loan as capital to purchase almost anything. It's also possible to obtain a loan over $1 million dollars, but that depends on the lender and one's financial situation.
Do Your Research First
Before you take out any sort of loan, do your research first. Make sure you understand the terms of the loan and that you can easily make the payments.
In most cases, taking out a loan will help you improve how your business functions. You'll also have peace of mind that you can easily make the important decisions regarding your business.
To help ensure you're equipped with the best and most up-to-date information, visit our resources page.