Every company experiences its ups and downs. During productive times, there are enough funds to see smooth sailing. However, when the market sees a downfall, you might have to look for other sources to fund the short-term financial crunch. In such a situation, a short-term business loan could help you manage and grow your business.
Short-term business loans
Short-term business loans are short-term funds you can borrow from a bank or a financial institution to finance your temporary cash crunch. You can avail a short term loan for the duration of a few months to one year. These are generally unsecured loans with a high interest rate.
Difference between short-term loan and long-term loan
As compared to, long-term loans are generally secured loans, which are availed for a longer duration of time. The tenor of long-term loans can go upto 15 years or more. Unlike short-term loans, long-term loans have lower interest rates and the quantum of loan offered by a lender could be comparatively higher. Examples of long-term loans can be a home loan, loan against property, education loan, etc. On the other hand, unsecured business loans is a short-term loan which can be utilised for emergency business needs like working capital or stocking up the inventory.
Kinds of short- term loans
To know how a short-term business loan can boost your business, let’s look into the different types of short-term loans.
- Working capital loan – Working Capital Loans are funds that you can avail to finance your business’s day to day operations like regular bills, cash flow requirements, employees’ salary, stocking inventory, etc. These are unsecured loans, which can be used for your small and medium scale enterprise that works on a cyclical sales model.
- Machinery and equipment loan – A sudden machinery breakdown or a fault in the working of any equipment can be detrimental for a manufacturing business. A machinery and equipment loan can help you replace or upgrade your equipment. It can also arrange quick funds to purchase small-scale machinery. You can also avail such kind of loans to buy computers or printers for your business.
- Flexi business loans – A flexi business loan gives you an approved pool of funds from which you can borrow any number of times. Such form of financing can be of great help to meet short-term business needs or to stabilise cash flow. Under these loans, interest is charged only for the amount you utilise.
- Loan against securities – You can avail a loan against shares by pledging your securities with a lender. These loans can be availed against company stock, mutual funds, insurance, bonds etc. You can avail these loans for your short-term financial needs without liquidating your assets.
- Credit card loans – A credit card loan can be availed against your unutilised credit card limit. However, some lenders might give you loan above this limit. The duration of these kinds of the loan can be for a concise period, anywhere from 2-6 months.
- Overdraft- When you are in urgent need of money but do not have enough balance in your bank account, you can avail a loan as an overdraft from your bank. The bank provides funds over your bank balance amount, up to a certain limit, on which you pay interest.
Short term loans for business growth
Short-term business finance helps bridge the gap of a temporary financial crunch so that the normal flow in the business is not disrupted. You can use the short-term loans for your business growth for the following purposes:
- Expanding your business by opening a new branch or increasing the client base
- Starting a new line of business
- Hiring recruits
- Managing the working capital gap, which can be used to stock inventory and purchases
- Funding emergency needs, like machinery breakdown or an increase in demand
Availing short-term loan
Various lenders offer unsecured business loans up to Rs.30 lakh at attractive interest rates. With pre-approved offers from the lender, you can get an instant loan approval.