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When Should I Consider A Short-Term Business Loan?


Minyang Jiang

Most forms of small business financing come with some kind of time period (or “term”) in which the loan needs to be paid back. These generally differ depending on the amount of the loan and what it’s going to be used for, but for the most part most small business loans tend to have longer payment periods.

That’s not always feasible. And in many situations, business owners have been finding themselves turning to short-term business loans to cover unexpected financial needs whenever they arise. While the terms and conditions may vary on these loans, they’re generally considered best for unexpected cash flow emergencies, taking advantage of business opportunities, and other more sudden needs.

Things to Consider Before Taking on a Short-Term Business Loan

If you’re considering going for more business funding and you think a short-term loan might be just what you need to get through your financing needs, here’s a few questions to ask yourself first to make sure they’re a good fit:

Am I currently experiencing a cash flow shortage?

Every business has a slow season, but no amount of planning can accommodate for sudden cash flow shortages or financial losses. If you find yourself short on money, but know you have money coming in within a certain period of time, short-term business loans can fill that need and help keep your business afloat while you wait for your revenue to pick back up.

Am I waiting for a lot of invoices to get paid back?

Most businesses tend to be cyclical in nature, and the process of invoices is one we’re all familiar with. If you have a lot of outstanding invoices that may not be paid before you need to start handing your expenses, short-term loans are a good call to fill the gaps before your clients can pay you back for your products and/or services.

Do I have emergency repairs or maintenance that need to be made?

Let’s face it, no matter what your business, things can (and will) break, largely at the worst possible time. While equipment loans are a good way to purchase equipment in the first place, more immediate repairs or replacement might be better handled with short-term funding due to the shorter loan period and amount provided.

Will I have short-term operational costs that need to be met?

While most businesses are able to plan ahead for bigger operating expenses, short-term loans are a good option to provide for more immediate expenses, or expenses you don’t intend to face for as long as others, such as temporary holiday help or equipment rentals.

Am I able to pay it back more quickly?

Finally, an important part of taking any loan is your ability to pay it back, and short-term loans tend to give you even less time to handle the repayment. Before looking into any financing, make sure your day-to-day cash flow will be enough to handle the repayment schedule of the loan itself to avoid placing your business into further debt.

If your business is encountering the need for some extra funding to get by, contact Credibly today with any questions you might have about our financing products.