Why Choose Short-Term Business Loans?

why choose short term business loans

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If you’re a business owner who wants immediate access to cash without the pressure of long-term principal repayments, choosing a short-term business loan could be the answer.

Operating a small or medium business is a huge undertaking that requires commitment and dedication. We know that becoming a business owner is a daunting but rewarding venture. Choosing to be your own boss is one of life’s biggest and most exhilarating decisions. And nobody ever said it would be easy. 

There comes a time in every business, whether you’re just starting, stepping it up, or tackling one of the unavoidable business obstacles, when quick access to cash flow becomes necessary. Committing to a long-term bank loan to finance equipment, purchase stock, or update branding is not the only option — and for many business owners, it may not be an option at all! If you’re looking to increase profits without facing the stress of traditional lending requirements, a short-term loan with flexible repayment options could get you back on top fast.

The true impact of interest rates

While short-term business loans often attract higher interest rates, they have a short borrowing period — which means less accrued interest on the loan.

Don’t be put off by comparing interest rates from long-term lenders to a short-term loan with a different structure. A short-term loan means you pay the loan amount back sooner, which means you’re not accumulating interest over the long term.

interest rates

Consider the following example:

A $50,000 loan with a loan term of 5 years and an interest rate of 12%

  • Monthly repayment amount: $1,122
  • Total amount of interest paid: $17,333

The same loan amount but a term of 15 years and a lower interest rate of 7%

  • Monthly repayment amount: $459
  • Total amount of interest paid: $32,695

As you can see, the loan with the lower interest rate and lower repayments might seem like the best choice (and maybe the best choice if your business is looking for a solution that suits their cash flow), but the short-term business loan accrues significantly less interest — $17,333 compared to $32,695.

Expect the unexpected

Capital and business cash flow can be affected by seasonality, credit that is owed to you, an unexpected crisis such as COVID-19 or a sudden need to relocate premises. Life happens, and it’s not always predictable. That’s where short-term business finance might really come in handy

As the director of your business, you’ve already made some adjustments and tough decisions to get where you are. Unexpected bumps in the road don’t have to throw you completely off course. With skilled employee shortages and increased daily living expenses, we’re all accustomed to shifting goalposts, making sacrifices and taking leaps into the unknown.

Improving business profitability doesn’t happen overnight or without investment in the things that make your daily operations run smoothly. It’s more important than ever to make your brand stand out and your customers aware of how you can make their lives that little bit easier. Investing in marketing and communications, top-of-mind/brand awareness advertising campaigns, and loyalty rewards are just some of the activities you can capitalise on today, to create stronger relationships with clients in the future. But none of that will pay for itself. Adopting a short-term lending solution can put you where you need to be now so that profitability becomes a reality in the future.

Reality check

We know that not everyone has a squeaky-clean financial slate, which is why a reality check is just as important as a credit check. We take the hassle out of challenging paperwork, poor credit history and unexpected losses by working with you to find the best finance solution that suits your needs — whether that’s a short-term loan or something different entirely.

 Located here in Australia, our team make applying for your short-term loan easy and repayments affordable. Speak to our knowledgeable and professional lending team about the best lending option for you, or apply for your quote online today.

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What sort of short-term loan can I get?

There are many different types of short-term business funding:

  • Caveat loans.
  • Invoice finance.
  • Trade finance.
  • Unsecured business loans (this may be a traditional bank loan or loan options from alternative lenders).
  • Business credit card.
  • Equipment finance.

Can small businesses get an unsecured business loan?

This depends on your unique circumstances and the eligibility criteria of the lender. If you have property or business/personal assets to use as security, often it can be quicker and easier for business owners to access a secured loan.

How long is a short-term loan?

A short-term loan can be as short as a few weeks, ranging all the way up to 5-year loan period.

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