A short-term loan can be used for purchasing inventory, for marketing services or for any other immediate business need.

Everything You Need to Know About Short Term Business Loans

 

It’s easy for business owners – new business owners in particular – to feel like if they aren’t able to secure cash and capital through a traditional loan with a local bank or credit union they are plumb out of luck and are facing a serious financial crisis.

 

In reality, however, nothing could be further from the truth.

 

Today there are more short-term business loan opportunities available for entrepreneurs than ever before. Some of them are more traditional options with a shorter-term length while others are more nontraditional and quite innovative – but all of them provide you with the access to the capital you need to build and grow the business of your dreams.

 

Here are some of the most common short-term business loans that you might be more interested in learning about.

Short-Term Financing Packages

 

Some of the most popular loan solutions for savvy entrepreneurs, particularly entrepreneurs or businesses that have at least average credit and short-term financial needs that have to be met ASAP, these lending packages are designed to last a term between 3 and 18 months (maximum).

 

The application process for these kinds of financial packages is significantly streamlined compared to longer-term loans, which also speeds up the approval process as well as the dispensing of your funds. In fact, some of the more popular short-term financing packages (online and off) promise to get you the cash you are looking for inside of 24 hours or less upon approval.

 

These loans are not ideal for those that need longer-term financing, however. They are more “spot fix” solutions when you need to purchase extra inventory and supplies, cover surprise gaps in your cash flow, or to gain access to the working capital you need to leverage an opportunity that popped up and is time sensitive.

 

SBA Lending Opportunities

 

The US government provides some pretty friendly financing packages for entrepreneurs as well, many of them available through the Small Business Administration – certainly an avenue of approach you want to take when you’re looking for short-term lending opportunities.

 

Because the US government partially guarantees these loans they eliminate a significant amount of risk that lenders would have taken on otherwise, making it easier for new business owners as well as those that haven’t had a lot of success in the past get their hands on financing that might not have been available otherwise.

 

Outside of traditional bank loans, these are probably the most affordable source of capital available, making them very attractive for small business owners “bootstrapping” their businesses from the ground up.

 

Loan types like the SBA 7(a), SBA 504/CDC, and SBA Microloan opportunities may be the right fit for you depending on your situation. In most circumstances, you’ll need rock solid credit or only be looking for financing of up to $50,000 in capital.

 

Because you’re dealing with the US government there are hoops you have to jump through here that you want with other short-term lending opportunities, and that’s going to track the process out at least a little bit.

 

Business Lines of Credit

 

If your credit is personally outstanding (or if your business credit is equally exceptional) you may be able to take advantage of business lines of credit that will be extended to those with less than perfect credit as well as those that are launching a brand-new enterprise.

 

These kind of lending packages are going to provide out ignores a chance to draw off of a specific line of credit as needed, pulling as little or as much of that financing out of the “line of credit pool” as necessary to meet their financial needs at that point in time.

 

An entrepreneur may be extended a line of credit of $100,000, for example, but they don’t necessarily have to use that $100,000 all at once. One month they might use $35,000, another $15,000, and another they might not use any of that line of credit at all.

 

It’s a bit of a revolving door of sorts for entrepreneurs, but that allows for a lot of flexibility that other short-term lending packages cannot provide. The biggest benefits here are when you’re looking to use this pool of capital to pay for recurring business expenses, to “float” your cash flow while waiting for your accounts receivables to come, or to handle unexpected emergencies or grab onto surprise opportunities that are time sensitive in nature.

 

These lines of credit are very, very difficult to be approved for though. You’ll want to do your research and move deliberately through the application process to increase your odds of success as much as possible.

 

Invoice Financing

 

This form of short-term financing essentially puts up your outstanding invoices as a security to gain a cash advance from a lending service. The unpaid invoices themselves operate as collateral towards this cash advance, allowing you to receive upwards of 85% of the total invoice amount you are using as security in the form of a cash advance loan.

 

Short-term lending opportunities are a great option if your cash flow isn’t particularly predictable because you have several clients or customers that pay at different times. This helps to create real consistency with your cash flow, though the interest rates attached to these kinds of lending opportunities are usually quite a bit higher than most.