When most people think of business loans , they will think of banks, credit unions or SBA guaranteed loan provided by a traditional five or ten years of the loan. When the borrower to meet the purchase of expensive heavy equipment, expanded to new locations or the construction of new warehouses and other needs, long-term loans might be a good choice, because long-term loans allow borrowers to reduce the amount of the loan process regular payments and better match production life of the equipment. Nevertheless, there are some use of the loans, the majority of long-term loans to small enterprises may not be the most appropriate. In this case, short-term business loans may be more suitable.

 , they will think of banks, credit unions or SBA guaranteed loan provided by a traditional five or ten years of the loan. When the borrower to meet the purchase of expensive heavy equipment, expanded to new locations or the construction of new warehouses and other needs, long-term loans might be a good choice, because long-term loans allow borrowers to reduce the amount of the loan process regular payments and better match production life of the equipment. Nevertheless, there are some use of the loans, the majority of long-term loans to small enterprises may not be the most appropriate. In this case, short-term business loans may be more suitable.

Business loans

Fortunately, for small businesses, their local bank lending is not the only place, have to choose from a variety of loans, short-term loans to meet short-term financing needs of the project.

When companies should consider short-term business loans?

The first question for any business before the borrower should ask is, “What is the purpose of the loan?” This will help determine how much they need to borrow money, the most significant loan conditions (short-term and long-term), and even they may wish to obtain funding.

According to the purpose of the loan, some small business borrowers chose short-term loans to reduce the total dollar cost of the loan. According to a survey commissioned by the Electronic Transactions Association show that 57% of small businesses will choose short-term loans in order to minimize the total costs and expenses in the short-term investment opportunities. Because the APR does not represent the total dollar cost of the loan, even if the APR is higher than short-term loans to long-term options as well.

The most explicit surveyed small business loans to two aim is to purchase equipment (54%) or to purchase inventory (51%) – two kinds of purchase tend to be very sensitive to the cost in dollars. More importantly, these small business every dollar is expected to have a 5-fold return their borrowed, which makes the total dollar cost of the loan to become one of their key consideration.

Some popular reasons to consider short-term commercial loans may include:

Project start-up costs: Sometimes adding a new project requires prepayment costs, which may exceed the ability to pay with cash flow, but will recover in 60 or 90 days when customers pay their invoices. In this case, the ability to lower total cost of $ rapid entry and exit financing may pay more sense than long-term loans for many years.

The elimination of seasonal cash flow gap: Many companies sometimes seasonal borrowing to meet short-term cash flow requirements that are cost dead time between the busy season to cover during the downtime. Doing so requires business of ensuring a strong cash flow in a slow period, so that the larger periodic payments typically associated with short-term loans. 
Buy at a discount stock fast turnaround: short-term business loans might be a good opportunity to purchase stock in the form of discount, the discount will rapidly change and allow enterprises to obtain additional profits.

It covers the cost of emergency repairs of critical equipment: When your business operations required equipment failure, short-term small business loan can help businesses operate again without the need for four or more years of the loan liability. All too often, short-term business loan approval rates than traditional banks may be long-term financing faster – which helps time is critical.

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