A short term loan is organized to be paid back within a year. There can be times when your business doesn’t have the capacity to apply for a long term/ business loan, which is why a short term loan. This is a useful source of finance for one time, short term tenure. The amount procured can be effectively be used for financing temporary working capital needs.
When the business requires quick finances, its best to choose a short term loan. However, with the number of choices in the market, it’s difficult to make an intelligent pick. Right consultation is relevant to choose the best for your business.
Here, we are presenting the positives and negatives of short term loans for increased understanding. This lesson will help you to utilize the short term loans better:
What are the commonalities between all forms of short term loans?
When we talk about short term loans, its majorly the speed of payment taken into consideration. Not just are the short term loans quickly sanctioned but also simplified its repayment. The maturity period of short terms is anything between 6-18 odd months. It is repaid at the discretion of the borrower- at maturity or earlier.
For loans with longer tenures will no more be called short term loans (They are generally called medium- or long-term loan). Longer term loans can have a tenure as long as 25 years. Sometimes, short term loans can come out expensive at the time of repayment.
Apply for : Short Term Personal Loan
What are the benefits of Short-Term Loans?
Shorter repayment can be beneficial when loans burden your inner self. Shorter periods also have consequences. It’s helpful to dissect different traits of short term loans and also under its complexities. Now, it’s time to look at some major benefits of short term loans.
Low Cost of Capital
A short term loan is comparatively much cheaper, in terms of price. Alongside, the cost of capital can accommodate more such short term loans. Infact, even when the rates of interest are high, it’s advisable to take short term loans. A short period will gather less interest amount.
You will commonly have heard about factor rate which is a number, multiplied by the borrowed loan amount to arrive at the overall short term loan cost. A short term loan determines the total cost per year to be returned within a timeframe of 18 months.
Fast funding for short-term needs, option will typically have shorter period and cost than usual. Short term loans are easily procured compared to long term funding options.
Infact, even an underwriting process is brief and leads to conclusive outcomes. Essentially, longer the repayment term, worse it is for the lending company. Likewise, shorter the repayment term, better it is for the lending company.
As a conclusion, we can infer that the application and procurement process is not that elaborate and heavy for planning and strategy. It’s simple most for short term loans. Short term loans are surely your savior as a budding business!
Also read more on: Loans and Personal Loan Online