Short-term business loans are helpful when covering unexpected business costs where funds are needed quickly. Whether you need to make an emergency payout, buy replacement equipment, or put on a sudden event, a short-term business loan can provide the necessary capital.
-Ideal for expansion or solving problems
-Can improve credit ratings
-Can be applied to many different, unexpected situations
-Collateral may be necessary
-P&L statements, balance sheets, and other documentation are required
These loans are very similar to term business loans, except they tend to focus on much smaller amounts and "short term" needs. That makes the loan a flexible solution to a wide range of unexpected problems and plans, so it's no surprise this loan is quite common. Payments are fixed and paid over time, usually over 1 to 5 years depending on the terms. Both traditional and nontraditional lenders offer different kinds of short-term loans: With their fixed rates and lower principals, loan applications can be completed speedily, another benefit when unexpected situations arise.
Many of the same rules for term loans apply here: You typically need a stable business that has been in operation for at least two years, with revenue history, credit scores, and tax returns to prove it. Many short-term loans also require collateral, but because of the low principal amounts this collateral often uncomplicated – cars, equipment, and other general assets are frequently used. Ask your lender about options if you are unsure what you can use as collateral.
Short-term loans usually have fixed interest rates or fixed monthly payments, which makes their payments more predictable (another boon to young businesses). While loan rates vary, they usually range from 6 to 13 percent.
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