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WHAT ARE THE PROS AND CONS OF SHORT TERM BUSINESS LOAN?



 If you are unable to get your loan approved from the traditional lender, you may want to consider applying for a short-term business loan from a non banking finance company. The alternative lenders will offer this financing option very easily. Every business is different from one another, so does the business financing. A type of capital beneficial for one business unit might not be the right solution for your company. Here, we will explain the pros and cons of applying a "Short Term Business Loan" from which you can determine what type of loan makes sense for your company.

Pro: Instant Loan

This is the major benefit of a short-term business funding as it can provide you fast capital for your business operations. Moreover, the application for this is much shorter than any other traditional bank as it requires less information. It can be useful if your business bills are due and you can’t afford to wait on long approval procedure.

Con: High interest

As the application process is very easy than other alternatives but they comparatively come with high interest rates. The loans which have longer terms usually end up paying more in exchange of same amount. It is the best way to minimize the total cost of working capital and to repay it as soon as possible.

Pro: Simple Application Process

As mentioned above, the application process for short-term is instant and will likely be easy to complete. It requires less paperwork and application can usually be completed online or offline. If you have any questions regarding this, do ask your lender first.

Con: Frequent Payments

The notable drawback of short-term business loan is that it requires frequent payments. It requires weekly or even daily payments. If your revenue source is not consistent then you should consider other loan option which might offer flexible repayment terms.   You can also qualify for trade credit which functions differently than short-term loan from a lender.

Pro: Easy Approval

These loans have remarkably high approval rates. If your business has poor credit history, you still can "Apply For Business Loan" that is short-term. The lender will ask your personal and business credit scores, but their requirements won’t be as strict if your score is good.

Con: Potential of Significant Debt

Always keep in mind that regardless of any loan product such as business loan, business line of credit etc, requiring any sort of debt is risky. You should avail a loan only if you are able to repay it on time. If you default then your business risks getting caught in a debt trap soon.

Short-term business loans sounds beneficial to finance your business but they do have some drawbacks, so always consider all available options before applying for a loan. However they have some risks, but they can be helpful to your business. If your firm has constant cash flow cycle, reliable source for repayments then short-term business loan might be right solution for you depending upon the specific conditions and requirements of your business.


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