A Brief Guide to Short-Term Business Loans

by | Dec 15, 2021 | Business Finance | 0 comments

As an entrepreneur, you will find that you’re going to need access to additional working capital at some point. What type of loan should you apply for, and what’s more, what is the best use for the funds you receive? In this article, we take a look at short-term business loans. A trendy financing option among small businesses, a short-term loan could be the ideal solution for your organization.

Understanding Short-Term Business Loans: Prepare to Apply

For those who may not know, a short-term loan is simply a lump sum of money that a lender will advance you. In exchange, you will pay this off monthly, or sometimes weekly, following agreed-upon terms and a fixed repayment schedule. In other words, there are no surprises as you will be paying back the same amount every month/week until the balance is paid in full.

With short-term loans, the repayment period can range anywhere from six months to 18 months (in some instances, they can be longer, it will just depend on your loan and the lender with which you work).

Borrowers will often use a short-term business loan for emergencies that come up or needs that have to be covered immediately versus longer-term projects. Keep in mind that the interest rates here can be a bit higher; however, you are paying the amount off over a shorter timeframe, so that accounts for some of the reasons why the rates tend to be on the higher side with a short-term loan.

What Can You Use a Short-Term Business Loan For?

The great thing about taking out a short-term business loan is that there is a ton of flexibility as far as what borrowers can use for the loan within the context of their business. From hiring more employees to weathering a difficult economic time, the list of fund uses is endless in some ways. Below are eight of the more popular short-term business loan uses.

1) Remodeling your office/storefront

Businesses outgrow their space. Either the place needs an update to reflect the business’s growth, or perhaps you want to expand the area. You will need money for such an endeavor. And a short-term loan could come in handy in this capacity.

2) Launching a marketing campaign

Your marketing efforts will need to be jumpstarted and refreshed every so often. Launching a new campaign can help to boost flagging sales. You might want to apply for a short-term loan to help cover your marketing initiatives.

3) Hiring new personnel

As your company grows, so do your employee needs. A staff of five can suddenly become a staff of fifteen. A short-term loan can get you the money you initially need to get the right people on board.

4) Emergency situations

Despite our best efforts, emergencies do arise every once in a while. You don’t want to deplete your cash reserves, and so applying for a short-term loan for the company could be the best way to handle it.

5) Dealing with a slow season

Many businesses are, in fact, seasonal; meaning, during some parts of the year, they may be swamped, while during others, not so much. Getting a short-term loan to help you through the slower times could mean the difference between surviving and having to close up shop.

6) Purchasing inventory in bulk

Suppliers will often offer attractive discounts if you purchase your inventory in bulk. However, you might not have enough cash on hand to cover this. Getting a short-term loan to take advantage of these types of discounts is a visionary strategic move.

7) Starting a new project

Startup costs for specific projects can sometimes be relatively steep. Many smaller businesses, especially, will look to a short-term business loan to help offset the project’s cost and thus pay back the loan as the project starts to make money.

8) Developing a new product

As you grow, you will want to introduce new product lines and expand your portfolio. This could be a costly endeavor from product development to testing to marketing and shipping. A business loan might be the way to go here.

First Union Lending is Here to Help

We work with clients from across the US. Our goal is to help small businesses thrive and grow. If you need additional working capital for any reason, we would love to consult with you. Our business loans are fast and flexible—some clients get funded in as little as two days. Call today to see how we can help you!