These are the advantages of short term loans, solutions for your business!
A short-term loan is a type of loan obtained to support temporary personal or business capital needs. Since it is a type of credit, it involves the amount of loan capital and interest to be paid by a certain maturity date, which is usually within one year of obtaining the loan.
Short-term loans are a valuable option, especially for small businesses or startups that don’t yet qualify for a bank credit line. These loans involve lower loan amounts, which range from IDR 5 million to IDR 50 million. Short term loans are suitable not only for businesses but also for individuals who find themselves having sudden temporary financial problems.
Short-term loans are so called because of how quickly they have to be repaid. In most cases, it must be repaid within six months to a year at most, 18 months. Any loan for a longer term than is considered a medium or long term loan.
Long-term loans can last from just one year to 25 years. Some short-term loans do not specify a specific repayment schedule or maturity date. They only allow the borrower to repay the loan at their own pace.
Business is indeed an alternative effort to achieve financial prosperity that is widely practiced. But the success of a business depends on its ability to continue to grow. But to do that, a businessman needs a steady and good steady stream of income as well as finances. Sometimes profits are not enough and small business owners need capital to give them a boost to move forward. With the additional capital, it is clear that a business can use it to buy more inventory, recruit additional personnel, or open more business locations. For example, for a culinary business, yes, multiply branches.
And, we know, nowadays, borrowing money is the fastest way to get the capital needed for business expansion. There are various business loan options to choose from. However, it is short-term loans that are gaining popularity and for good reason. Let’s take a look at some of the advantages of short term loans.
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1. Fix Financial Problems
The pace of finances is very slow, it does happen at this time, even in big businesses though. During these times, small businesses run the risk of going out of business. Careful planning can sometimes help with this, but when that’s not enough, a short term loan can help.
Use the funds to pay off supplier bills and various other operational costs. This will also keep our business stable.
2. Keep Up With Seasonal Trends
Small businesses that see increased sales activity during seasonal periods know the financial difficulties they face. Trying that seasonal trend requires us to buy more inventory and hire more staff. Otherwise, our business may not live up to market expectations. This in turn can lead to lost revenue as our customers leave.
So to prevent this from happening, we need extra capital. Short term loans are the perfect solution for this situation. Use it to cover the salaries of temporary workers and to prepare for impromptu vacations.
3. Expand Business
There comes a time when small business owners want to grow. Several ways to do this, including acquiring a larger building or place of business, purchasing additional warehouses to store inventory or opening a new location may seem necessary.
But the costs associated with expansion are vast, depending on how we try to do it. Whatever plans you have for the growth of our business, it may indeed require additional funds. The capital we get from short-term loans can give us the flexibility to buy what we need without worrying.
Short-term loan terms usually make sense, because they can give us enough time to pay them off.
4. Take Care of Emergencies
Even the best planners can’t plan for emergencies. It appears out of nowhere and can destroy all aspects of any business field. So, the best way to prepare for an emergency situation is to have insurance.
Short term loans are a great form of insurance because they are quickly obtained. And in most cases, we can get a short term loan of 5 million to 50 million. This fund provides plenty of room to get what is needed to handle any emergency experienced in our business.
Some of the emergencies that can occur include equipment failure and computer crashes and natural disasters.
5. Improve Credit Rating
All businesses have a credit rating. By taking out a loan, we help build our credit history. Of course, we must pay them on time to ensure our credit rating is on target. Because this credit history can be very influential if one day we apply for a loan again.
Another difference between short-term loans and long-term loans is that there are short-term loans that use collateral or not. There are pros and cons to both options. You will benefit from lower interest rates with secured loans but for short term unsecured loans you do not have to provide any collateral.
6. Short-term loan application process is fast
Many lenders now offer a quick and easy application process for short-term loans, allowing business owners to apply for loans online in the shortest possible time. Unlike traditional lenders (like banks), you don’t have to spend days drafting paperwork or scheduling meetings just to access the capital your small business needs. Loan applications can be completed in just a few minutes, all from the comfort of your own computer or smartphone. It’s no wonder that because of this convenience and speed, online loans are in great demand.
7. Short-term loan approval process is faster
Thanks to alternative lenders, short-term loans can be approved in as little as 24 hours, with funds deposited into a given bank account the following business day. Other types of small business funding (including those from traditional lenders such as banks) can take days, if not weeks, to be approved, therefore delaying the required funding for a while. Not only can this cause stress for business owners, but it can also leave those in a vulnerable position as they wait for a much-needed cash loan.
8. Have low and flat interest
One of the advantages of short-term loans is their low interest rate and flat/flat interest. The interest given by banks is usually at 3-7% per month, while non-bank institutions provide daily interest in the range starting from 0.5% and this depends on the policies of each short-term loan provider. In addition, the interest given on this short-term loan is flat or fixed interest. This interest will not change until the end of the installment because it is not affected by market fluctuations.
9. Easy requirements
For business owners choosing a short-term loan, they definitely want an easy one, both in terms of terms and processes. Well, another advantage of short-term loans is that the requirements are easy. The rules for short-term loans are indeed more lax than long-term loans. The freedom to use these borrowed funds is also attractive. Some even only require an ID card to get this short-term loan.
It’s hard to predict where our finances will be in the far too long future. No one knows for sure how the economy will be in the next 20 or 30 years. With a long-term loan, you will still be responsible for payments far into the future, regardless of what your financial situation is. It is much easier to forecast and budget for short-term loans.
11. Lower stress
Because having money for a long period of time and noticing an increase in interest, will have an emotional and psychological impact. With a short-term loan, you will pay off debt much faster and free from that burden. That way you will be more focused on your business.
12. Short payment period
Usually, short-term loans have to be repaid between 6 to 18 months. If you apply for a loan to deal with an emergency, short-term loans allow you to repay the loan amount in about a year or less so you can plan the main flow of funds for other things.
So, those are the benefits of short-term loans that you can get in developing your business. This short-term loan will be useful if you are smooth in paying it off. You need to remember, yes, if this short-term loan is not suitable for business capital. Because maybe you will only come up short if you use it as business capital even though the profits from your business are not much. Planning to take a short-term loan can indeed be a solution for fast funding needs. But you also have to estimate whether everything can cover and not increase your debt burden. Keep planning properly if you are going to develop your business, starting from the financial system and also the support of a good business system, so that the loan funds you get can be the best support for your business.
Because unsecured short-term loans, on the other hand, are arranged without the need for collateral. Those who have no collateral available or are already burdened by secured debt, therefore, are still eligible for personal loans with reasonable terms and payments that they can handle.
Always consider your options for financing before agreeing to something like a personal loan. Because you may find that we can benefit more than other types of financing, loans or payment arrangements. At the same time, don’t overlook the possibility of an unsecured loan if we’re concerned that we have funds available but you can’t offer or don’t want to offer collateral.