Pros and Cons Of Short-Term Loans

Pros and Cons Of Short-Term Loans

All businesses thrive when they have a sufficient amount of working capital to meet operations and grow. When cash runs short temporarily, it may be a good idea to consider a short-term loan.

The Problem With Traditional Bank Loans

Traditional banks do indeed provide loans to businesses. It may be difficult, however, to obtain one. If your credit score is not top-notch or your revenues are deemed too low, your loan application may be denied by them. Fortunately, you have other options, one of which is to obtain a short-term loan from an alternative lender or the Small Business Association.

Short-Term Loans: The Benefits

Short-term loans from alternative lenders come with many benefits for business owners. These include:

  • Less stringent requirements than from a traditional bank,
  • The easy-to-complete and relatively non-intrusive application process, 
  • A quick decision on funding from the lender, and
  • The speedy arrival of your capital so you can carry on with your business  

Although a short-term loan may be just the ticket, there are some downside considerations to think through.

Short-Term Loans: The Disadvantages

Of course, you’ll want to weigh these advantages against some of the cons of taking on a short-term loan. They can come with relatively high-interest rates. And, of course, no business wants to take on too much debt.

If these potential disadvantages are concerning, there are other funding options that may be useful that do not require taking on debt at all. One such method is invoice factoring, which involves the sale of your yet-to-be-paid invoices to a capital agency.

Freedom Capital Solutions

Here at Freedom Capital, we are ready to help your business through most any short-term shortfalls in working capital. We offer short-term loans and other financial options. Give us a call to discuss the perfect solution for your unique business situation.