Versatile Arrangement of Funds Through Short Term Business Loan

Posted by Nick Niesen on October 29th, 2010

Most of the times, it has been seen that the business whether small or big has to face certain periods in their business, which affects the inflow and outflow of cash. This inadequate inflow and outflow hampers the working of business. A single wrong step in the business can lead to huge losses. A practical example of adequate inflow and outflow can be of seasonal products. The seasonal products are available in a particular season and the sale of which is realized in these months. Then what about the rest of months? There will be no or negligible sale in the remaining months. This will harshly affect the working of the business.

By keeping in mind all these factors, the financial market has introduced the short term business loans. They are especially designed for meeting the needs of the business. In order words, it is a good way to raise working capital for a business.

Short term business loan is provided for a period from 90 days to 3 years, depending upon the purpose of the loan. As these loans are for the short period, the lender expects that when the borrower is in good financial condition he should repay the amount as soon as possible. The reason behind this is that the lender avoids taking high risk on the amount lent for the short period.

Short term business loans fit both the needs of new business and an existing business. Before lending the amount, the bank or the financing company will review the history of your cash flow of your business.

It is generally seen that the short term business loans are unsecured. In other words, there is no need of collateral in availing the short term loan amount. Only your business history and its profitability are taken into account.

Rate of interest varies from individual to individual, depending upon the financial status of the borrower. The person can choose fixed or variable interest rates for repaying the loan amount. In the fixed rate, the person is required to pay the interest as the rate fixed between him and the lender. While in the variable interest rate, the rate varies as the movement in the money market. One of the advantages of choosing the variable interest rate is that there is no penalty on early repayments. While in the fixed rate of interest the person has to pay the charges and penalties for the early repayments.