Short-Term Business Loans
Don’t Take out ANY Short-Term Loans until You Read THIS Guide
Small business owners understand how important quick access to working capital really is.
At the same time, small business owners and entrepreneurs understand just how challenging it can be to take advantage of traditional lending opportunities.
These kinds of loans, “golden ticket” loans that would allow a business to skyrocket to the next level of success have a lot of stipulations, a lot of requirements, and a lot of restrictions placed on top them – mostly because of the Great Recession of the mid-2000s.
Trying to keep cash flow positive while at the same time growing a small business becomes a real uphill battle. Small businesses always have to contend with unforeseen bumps in the road like slow paying clients and customers, the seasonality of many of these kinds of businesses, and unexpected opportunities leaping out in front of them – usually when they are least prepared to take advantage of them.
Thankfully though, the nontraditional lending industry has exploded in popularity over just the last few years.
These kinds of lenders have stepped in to fill the vacuum left by banks and credit unions.
Traditional lenders are anything but comfortable with offering short-term business loans to bad credit entrepreneurs On top of that, they don’t like working with entrepreneurs with anything less than years of success under their belts, and those looking to dive into new industries, market segments, or rollout new and potentially risky products and services.
The best short-term business loans are coming out of the nontraditional market, giving entrepreneurs an opportunity to avoid the “cash crunch” that will impact EVERY business at one point or another.
By working through the quick guide we highlight below, you’ll be able to avoid disastrous short term business loans completely while sifting through all of the options available – options that can help you make your financial future a reality a lot faster than you would have anticipated possible otherwise.
Yes, there are going to be minefields you have to navigate in the world of short-term business loans.
The nontraditional lending market is filled with predatory practices looking to separate less than savvy or desperate small business owners from their cash (and their businesses, in a lot of circumstances) while promising to fix all of their short-term problems.
Those are not the kinds of companies you ever want to find yourself mixed up with.
But the opportunity to work with great short-term business lenders definitely exists, too. These are the kinds of nontraditional lenders that see themselves as business partners, looking for ways to help you create manageable and sustainable growth with the kind of investment that you wouldn’t have been able to gain access to otherwise.
Let’s dig right in.
Highlighting the Types of Short-Term Business Loans Available
Today, more than at any other point in human history, nontraditional lending opportunities are more plentiful – and a lot more trustworthy.
You don’t have to worry about running into loan sharks any longer to make your business a success you know it could be, and you don’t have to sell out your financial future just to fill a couple of gaps in your financial present.
At the same time, some of the best short-term business loans are still going to come out of the traditional lending market. Yes, there’s going to be more restrictions on these loans, more requirements for approval, and the odds are you won’t be able to get all of the money you are looking for with this approach – but that doesn’t mean you should discard traditional banks or credit unions entirely.
Traditional lenders almost always offer the lowest interest rates you’ll find on ANY of the short-term business loans, working capital loans included. If you’re serious about taking advantage of financing options that include a single digit interest rate, these are the kinds of financing packages you need to look into.
On the flip side of things, if you are able to qualify for the best short-term business loans that traditional lenders have to offer the odds are pretty good that you wouldn’t actually need to take advantage of one in the first place.
As we touched on a handful of times throughout this quick guide already, after 2008 the overwhelming majority of banks and credit unions have grown gun shy about offering any kind of loan to businesses that haven’t been around for years, aren’t able to produce records showing top-flight cash flow, and are run by entrepreneurs with anything less than picture-perfect credit.
You might find yourself moving through a short-term business loan application process – a lengthy short-term business loans application process, at that – only to find that you are turned down because your credit history shows a score just a few points below their threshold for tolerance (even if you meet all of the other key criteria).
Most of the small businesses out there that can meet these skyhigh requirements would usually be much better off pursuing other lending opportunities and not choosing the best short-term business loans from banks and credit unions.
Lines of Credit
Representing some of the best short-term business loans any entrepreneur can take advantage of, these kinds of lending packages are just a little bit different than the loans you could get from a bank or credit union but usually have similar interest rates (though they will inevitably be just a little bit higher).
When you look into opening up a line of credit with a nontraditional business lender, you’re essentially opening up a “business credit card”.
You’ll move through a quick, simple, and straightforward application process that usually only takes about an hour or so to fully complete. By the time you’re done, you’ll be granted a preliminary approval or disqualification – and you’ll be notified immediately either way – and then you can move through the rest of the process to either gain access to your funding inside of 72 hours or to navigate the process with someone directly to see if your disqualification can be overturned and changed into an approval.
The big benefit with these kinds of short-term business loans is that you only ever have to worry about paying interest on the amount of money you use from your line of credit and not the entirety of the line value.
Let’s say that you apply for and are approved for one of the best short-term business loans offering a line of credit. You get a line of credit valued at $50,000, with very friendly interest rates that sit at just about 11% and a longer term of repayment that stretches out 18 months or so.
But since you were only looking for a line of credit that was valued at $25,000, and that’s all you need to take advantage of a new opportunity, that’s all that you “withdraw” from this line of credit – and that’s all that you are going to be paying interest on.
You don’t have to worry about paying 11% interest on $50,000, and you don’t have to worry about paying the entirety of that $50,000 back within the 18 months you have to make payments. You’ll only ever be charged interest on what you use, making this a smart and savvy move for small business owners that can be approved for this type of financing.
Small Business Administration Loans
SBA loans just might be the best short-term business loans available for any entrepreneur.
Not only are these loans at least partially (and very often only) guaranteed and backed by the US government, but they also have maybe the lowest interest rates you’re going to find ANYWHERE.
We’re talking about short-term business loan interest rates that can hover around 6.5% or so, often times much lower than the interest rates you would be able to get from a standard bank or credit union.
Instead of looking to take advantage of short-term business loans directly from those kinds of organizations, you’d instead work directly with the SBA during the application process. If you meet the requirements of the SBA (short-term business loans for bad credit entrepreneurs may or may not be possible with this approach) you’ll have at least a portion of your loan guaranteed by the US government which makes traditional lenders a lot more likely to do business with you.
The downside here, of course, is that these business loans are going to take almost forever to move through the application process. This isn’t something you can hammer out in a day or two, but is instead something that can often take a month or more to successfully navigate.
Both of the SBA and the individual lender you’ll actually be moving forward with will have their own application process that needs to be navigated, which will take a bit of time. And as we mentioned above, entrepreneurs with less than picture-perfect credit (at least a 650 credit score) will still have an uphill climb to be approved for these kinds of loans.
Short-Term Working Capital Business Loans
Working capital is legitimately the lifeblood of any business, large or small.
The cash flow that you have coming into your business makes your business possible, and absolutely nothing in the world of business is possible unless you are selling things and have money coming in.
It’s impossible to grow a business without positive working capital coming into your operation, which is why so many small business owners do everything they can to improve sales and drum up new business.
But what if a new opportunity comes down the line that could mean dramatically increased revenue, but because you don’t have enough working capital right now you aren’t able to jump on board?
Or what if a gigantic order comes down the pipeline, and because you don’t have enough working capital to meet the demand you aren’t able to even fulfill that order – killing your business by attracting exactly the kinds of customers you need to build the business of your dreams in the first place.
That’s where short-term working capital business loans come into play.
These kinds of lending opportunities are designed to help you meet your financial obligations and to maintain the daily operating expenses of your business.
Maybe a portion of these working capital loan go to hiring new employees or increasing your production capabilities, but for the most part these kinds of loans are going to be used to free up working capital that would have been spent on these expenses to reinvest that money elsewhere to build, grow, or seize new opportunities.
A lot of nontraditional lenders make fantastic short-term business loans available for those looking to increase working capital. Small business owners are looking for these kinds of loans all the time, mostly because help small business owners:
- Get through the seasonality of certain kinds of small businesses
- Take advantage of new opportunities that wouldn’t have been available otherwise
- Prepare for emergencies or outsized orders that wouldn’t have been met before
- Handle short-term debt obligations
… And generally add a sense of security and peace of mind that your cash flow won’t ever be attacked, particularly when your business is young and growing.
There are quite a few lenders (nontraditional lenders) that specialize in these types of short-term business loans. It’s important that you do everything you can to take advantage of the best short-term business loans for working capital available from these specialists, as opposed to moving forward with any nontraditional lender that offers a working capital loan package as part of their “full menu”.
Lenders that specialize in working capital loan are going to better understand this form of lending than anyone else, they’re going to understand whether or not you are able to take full advantage of this type of loan or are better served elsewhere, and are going to be able to find ways to work with you so that you make the most of this new lending opportunity.
Finding the best short-term loans for your specific needs will never be as simple as deciding you need cash and capital and then jumping on the first opportunity that comes down the line.
Smart and savvy entrepreneurs understand that the best short-term business loans are going to involve a combination of different lending opportunities, lending opportunities that are taken advantage of at different points in time and for different reasons entirely.
Hopefully we have been able to shine a bit of light on the topic for you with this quick guide so that you make smart decisions for your business going forward. Just know that no matter how things might look right now, no matter how less than picture-perfect your credit history might be, there is always going to be a lending opportunity out there for you to make the most of.
Use those opportunities to build the business of your dreams!