Ensure Seamless Business Operations With Short Term Finance!

Multiple small businesses operate in the market. Their owners run the business by performing daily activities and meeting financial obligations regularly. They need funds to finance the bills receivables, purchase inventory for cash, pay for utilities and labor, and other expenses arising during the business. Though they keep certain funds aside for working capital, the uncertainties and fluctuations in revenues might compel them to borrow funds for the short term. 

Established businesses operating for more than two years are eligible for business finance from small business loan lenders. They can obtain the required funds in the form of small business administration loans, business lines of credit, invoice financing, short-term loans, and others. Each source comes with different terms and conditions and might require collateral or entail higher costs without security. 

The followings are the implications,

• The businesses get the unsecured, short-term loan within as little as 24 hours with minimum documentation. The borrowers need to repay it daily, weekly, or fortnightly along with high interest over a predetermined period. Many small business loan lenders provide these loans to earn high returns within the short term.

• The guaranteed SBA loans come with a tenure of 7 to 25 years and the lowest interest rates for strong credit business entities. They involve an elaborate application process and screening criteria, making it less accessible and desirable to many.

• The businesses get a line of credit from the banks or FIs with whom they have accounts. Under this arrangement, they can borrow the funds up to a sanctioned credit limit and pay them back. They can use it frequently and pay the interest on the borrowed amount. It is flexible borrowing that allows businesses to manage fluctuating cash flows and unexpected expenses. However, some banks charge maintenance or withdrawal fees and offer the facility to enterprises with consistent revenues and high credit scores.

• Invoice financing is a way to obtain short-term funds for business wherein the entity gets funds against invoices raised and due from the customers. It is generally for 1, 2, or 3 months. Point of sale for small businesses can be multiple for some, resulting in various invoices issued to the customers. These invoices make up a considerable part of the working capital of an enterprise, tying up more short-term funds.

The Bottom Line

The entities can opt for any source of borrowing based on the cost, borrowing term, collateral requirement, convenience, documentation involved, the sum of money, and repayment and eligibility conditions.