The Benefits Of Short-Term Business Loans After Lockdown

The Benefits Of Short-Term Business Loans After Lockdown

Having enough cash flow and financial backing is essential for any small business to get off the ground.

Short term business loans are a great backup plan for start-ups and existing businesses.

Short-term business loans are a quick way to get that cash you need to pay wages, rent, tax debts and those unexpected business expenses.

Short-term business loans generally have a term of up to 36 months which means they are a quick cash injection to your bank balance. Having this extra cash in your bank account is comforting to many businesses, especially in these tough COVID-19 times where many business owners have to endure lockdowns. But, remember, just because you are not in the office or able to open the doors of your business, the bills don’t stop. They continue to hammer you daily, and without the urgent cash flow injection, you may have to close your doors and cease trading, which is why a short term business loan is so critical.

However, your business may need the extra cash in the form of a short term business loan for other purposes, such as buying a property where you need commercial bridging finance or perhaps taking advantage of some fantastic deals on equipment or inventory. In any case, having that extra cash in the bank will give you the extra confidence needed to keep trading, expand and grow your business even during these crazy times.

Following is a quick snapshot of the benefits of a short term business loan after these nasty lockdowns end.

The Benefits Of Short-Term Business Loans

There are lots of immediate benefits of short-term business loans.

Keep your business running: if the cash flow has dried up and you have exhausted all avenues to get money, then a short term loan is the next best thing.

Grow operations: you might be thinking about expanding interstate and need to buy extra equipment or put a deposit down on a property. Perhaps you need to get additional stock for a new market or hire new staff; a short term loan is the most straightforward way to facilitate this type of expansion.

Purchase equipment: You can use a short-term loan to purchase the equipment for business growth and then look at repaying this once you start seeing the cash come in and the fruits of your labour working out.

Increase working capital: a short-term loan is a great way to manage the day-to-day business operations and keep the business running during the sales increase. If you’re sitting there wondering how to grow the business even if cash flow is tight, you are super confident that you can trade your way out of this doldrum in the future; your short term business loan is the key to this financial freedom.

Benefit from an exciting opportunity: you never know when there’s an exciting business opportunity to grab. It could be huge sales on stock or inventory you need, or perhaps some new property has just come on the market that you would love to snap up. Having a short term business loan allows you to be nimble and react to these golden opportunities.

Keep trading: if you have a seasonal business and need cash to tie you over till the following season, a short term loan is an answer. It gives you the money you need to stay afloat.

Helps with your credit rating: all businesses needing to expand in the future will require some credit history if they intend to borrow money. Therefore, a short-term business loan helps you establish a solid footing with your credit rating and score.

The above a just a few of the benefits a short term loan has for your business. And, I want to make this point that we live in very precarious times where Governments control what stays open and what companies need to close. But, COVID has rewritten the rules, so a short-term loan is critical if you want to keep trading into 2022 and beyond.

Different Types Of Short-Term Business Loans

When looking at the benefits of short-term business loans, you need to know about three different types of loans.

  1. Secured business loans: can be anywhere between three to 12 months and are a great short-term option. However, they require collateral used as security, such as your home or current commercial property.
  2. A business line of credit: think of it like a credit card where you only pay interest on the money your use.
  3. Invoice financing: which is where you engage a third party to pay all your outstanding invoices while you only pay interest on the balance until the funds are made available to you. Invoice financing is a great way to access cash on all those invoices that are yet to pay. Make that big pile of invoices work for you by converting them into invoice financing.

The Benefits Of Short-Term Business Loans: How To Apply?

Getting a loan is not as simple as it would seem, and you have to do your homework and shop around for the best short term business loan that suits your needs.

  • Borrowed money in the form of a short term loan still has to be paid back eventually. So, you have to have a good understanding and thorough knowledge of expected future sales that can cover both interest repayments and the principle. If your loan is secured and you fail to meet your financial obligations, you may be in hot water and lose your primary asset. So, before you go for a loan, be in a financially sound position where you can afford to repay all commitments.
  • Choose the best lender: don’t just head to the local bank and think you get the best deal. Shop around and look for lenders that offer competitive interest rates and lower set-up and ongoing fees. And, it would help if you are looking for a lender to help you when you need it. More often than not, you will need to speak with a real person with a sense of compassion for your business and the troubling times we face. Talking to a cold faced bank manager might not be the best solution when a state premier has just announced a further lockdown. Compassion doesn’t run in their veins, and they just might call in the loan when you need the money the most, which is why a boutique lender like Sparrow Loans are the perfect short term funding solution.
  • Ask questions: don’t accept everything they say and ask questions about your loan repayments, especially if lockdowns happen continuously.
  • Agree on loan terms: make sure you have your bargaining skills and work out the best loan terms for your business. Remember, there’s always a tiny bit of wriggle room for rates.

The Right Short-Term Loan For You

The above are some helpful tips and benefits of taking out a short term business loan. But, ultimately, the decision is strictly financial, so you have to make the right decision from the beginning.

The expert team at Sparrow Loans is dedicated to finding suitable loans solution for your business.

The online application process is simple and super easy, and the best part is you can have your approval within two business days.

About the author

Ulrika Lobo

Ulrika Lobo is the lending specialist at Sparrow Loans and has over ten years of experience in the commercial business loan space. Ulrika co-founded Sparrow Loans to provide Australian SMEs with a faster and easier way to access finance. Ulrika is responsible for managing the lending process from underwriting to execution and settlement and post-settlement support.