Are you looking to take advantage of an investment opportunity but have insufficient funds in your account? A short-term loan can help you secure funding for your desired project.
Short-term loans are credit funding issued by banks to individuals and businesses for a period not exceeding 12 months. It has underlying characteristics such as quick to secure and short repayment window, flexible terms, and lower amounts that can help you bridge the financial gaps. It is important to remember that proof of income isn’t always required when taking out loans like these, but that it does depend on whether you’re taking out a regulated or unregulated loan.
In addition, short-term loans are ideal for anyone not eligible for intermediate or long-term loans to support their investment or businesses. You can leverage such loans to increase your existing capital or improve cash flow in your operations. Also, the loans are unsecured and don’t require guarantors to boost the application process.
However, it’s crucial to research the full details of short-term loans and review your personal or business needs to determine how much you can request and develop a repayment plan. It’ll help maintain your creditworthiness to pivot yourself in any niche of your choice.
Here are seven types of short-term loans to remedy financial gaps.
- Invoice Financing
Businesses use invoices to request payment for goods and services rendered to the customers. So, you can secure funding from a creditor financial institution by presenting outstanding invoices that are due as your business income.
Once the lender approves your loan, interest will be charged against the outstanding invoices. If your customer remits payment on invoices you raised, the lender will only collect the agreed interest, and you’ll receive the balance.
- Online Loans
Fintech companies are causing a revolution in the financial sector by introducing instant loans via mobile or online applications. It’s the easiest way to get a short-term loan if you’re in a cash flow crisis.
You need access to the internet and a smart device to apply for funding. The lender will credit your account and charge a little interest on your requested amount.
You’ll have to link your bank account with the lenders and get your loan processed online. However, you must present your identification details to prove you’re not a robot taking advantage of the lender.
- Payday Loans
If you’re a business or personal project that needs funding, payday loans offer a quick way to care for such emergencies. You can apply for payday loans and get instant funding to continue working on your project.
Payday loans have underlying attachments that can be tough on you if your financial health is unstable. The lender will collect the principal amount and interest chargeable all in one go from your account. Such moves can cause a significant dent in your finances, thereby crippling your business operations.
- Lines Of Credit Loans
Line of credit loans has similar features as personal or business credit cards. A line of credit generally has capped limits based on the lender and loan terms. Repayment of a line of credit loan has an annual percentage rate (APR) interest charged on your spending, which is lower than the conventional credit card. The lender will collect what’s due monthly.
- Merchant Cash Advance
A merchant can improve cash flow in a business by approaching a lender to give cash advance loans. If you borrow money from a lender, they can allow you access to the amount you request. It enables your business operations to continue uninterrupted, and the lender can collect a percentage of your business income from repaying the loan.
- Overdraft Arrangements
Overdraft or OD arrangements are short-term loans given mainly through financial institutions to support your business or personal operations. The bank allows you to spend money when your account balance is insufficient.
Typically, overdrafts have time and amount limits depending on the amount you need to use. It’s crucial to learn the different overdrafts available to get cheap repayment rates. You can have an arranged OD between you and the lender with limits or an arranged OD with unlimited access to the loan facility.
- Selling Goods On Installments
If you’re a buyer, you can purchase goods and services from a seller and repay the amount due over a stretched period. It’s also known as an installment sale, where you can collect goods at a predetermined period and pay after a deduction of your expenses and revenue from a deal. So, keep records of all the transactions in your business.
Final Thoughts
Short-term loans can save your business from losing prospective customers and maintain operations. Financial gaps can find you off-guard, and your company may grind to a halt. So, it’s crucial to learn what short-term loan options are available to support your business. Also, you must be familiar with time limits and the interest charged by the lender.