Unlike traditional loans, short-term financing, or working capital, is a funding option offered by non-bank lenders, providing fast cash to businesses wanting to expand, finance inventory, consolidate debt, cover seasonal costs, and more. The funding period is a lot shorter than a regular business loan, meaning better rates that are not dragged out and crippling to business owners.
Acquiring a short-term cash advance or funding is beneficial for small businesses that don’t have sufficient balances and urgently need cash for operational expenses and more. Short-term financing is structured as a lump sum payment that ranges anywhere from $ 5000 up and must be paid off between 6 months to 18 months. The amazing perk of applying for funding is that you need not complete lengthy paperwork to apply. Financing approval is a quick turnaround.
Types Of Short Term Financing
Merchant Cash Advance
This type of short-term financing is a cash advance that functions as a loan. The lender funds the amount needed by the borrower – upon credit checks and approvals. The borrower makes the loan payments by allowing the lender to access the borrower’s credit facility. The term is fixed, and payment arrangements are confirmed with the lender before funds are issued.
Bridge Financing is used until a company secures permanent financing or removes an existing obligation. It allows the borrower to meet current obligations by providing immediate cash flow.
This type of financing is done by using a business’s accounts receivables – invoices that are, as yet, unpaid by customers. The lender loans the money and charges interest based on the number of weeks that invoices remain outstanding.
What Can Short-Term Financing Be Used For?
Short-term financing can be used for business needs, mostly resolving sudden cash flow problems. Many businesses use short term financing for/to help with:
Inventory and supplies capital
Upgrade or repair equipment
Launch marketing campaigns
High cost of goods
Expanding a company’s facility
Overcoming damage or disaster expenses
Maintain steady cash flow
Disadvantages of Short-Term Financing
The primary and only disadvantage is that the product costs more than your traditional loan. The rate may be higher; however, it takes less time to pay back the cash advance. The higher rate than a bank may charge is because it is a higher risk financing with minimal paperwork provided very quickly. Many provisions require the merchant’s good faith and satisfactory effort.
Why Choose Short-Term Financing?
As these are to be paid off in a brief period within about a year, the total interest cost will be the least compared to long-term loans that take many years to be paid off. The long-term loan total interest cost might be more than the principal amount.
Quick Turnaround Time
As the risk involved in defaulting, the loan payment is lesser than the long-term loan as they have an extended maturity date. Because of this, it takes lesser time to get sanctioned the short-term loan as their maturity date will be shorter. Thus one can get the loan sanctioned and the fund disbursed very quickly.
As it is less risky, the documents required for the same will also be not too much, making it an option for all to approach short-term loans.
Short-term financing is beneficial for small to medium-sized businesses, offering an excellent way to resolve sudden cash flow issues. If you are ready to take the leap and get funded in less than 24-hours, Apply for funding with us today. We provide a Fast, Simple and Secure way to gain working business capital in as little as 3 hours of applying. Our 4.6-star rating speaks volumes – we are a small business supporting small businesses.