What Are The Top Perks Associated With Short-Term Loans

Posted by Anne Moen on May 30th, 2019

If you are a businessperson who wants to secure the finances quickly, then a short-term loan can really come to your aid. But with so many varied loan options available in the market, it can feel difficult to be sure if a short-term loan is really what your business needs. So, to help you make the crucial decision, here is a list of the top three benefits associated with short-term loans.

Low Cost Of The Capital

This factor is the first, and probably the most noted perk of taking a short-term loan is the low cost of capital. The long term loans have a high cost of capital, which makes it inaccessible to many. It really makes sense when you think about it, even at the high interest rates, the short term loans have interest rates for a short period of time when you repay them. As such, the short term loans usually accumulate less total interest over a period of time.

You can come across such short term loans that have the costs expressed as factor rates. A factor rate is a decimal number which tells you the overall cost of your short term loan when you multiply it with your loan amount. This factor is because the annual percentage rate, which is based on the annual cost of the loan, would make the short term loan paid off in eighteen months feel exorbitant.

Consider that you have taken a short term loan of 1.15 where the factor rate usually comes anywhere between 1.14-1.18. If you apply that to a short-term loan of about a thousand bucks, you will have to multiply a thousand bucks with 1.15. You will see that the loan costs about 1,150 in repayment and 150 in terms of accumulated interests. The rates might be high for short-term loans, but the funding option usually ensures that it costs less than the long term loans with low rates.

The Speed Of Receiving Funds

The best thing about the short term loans is that you will get the funds quicker than the long term loans. The underwriting process on the short term loans is lesser than the long term loans. It gets riskier for the lender when the repayment term on loan is long. The short repayment time ensures lesser risk for the lenders.

This low-risk factor leads to several other things for the borrower as well. The application process is comprehensive, and the paperwork is simple in most kinds of short-term loans. Short-term loans are a practical option for the borrower because they are processed much quicker than the long term loans.

The Simple Guidelines Of Qualifying

A perk to the low-risk nature of short term loans is that it is easy to qualify. In fact, this is one of the main things that draw people towards short-term loans. Regardless of how convenient or affordable long term loans are, they are of no use for your small business if you are not able to qualify for that.

It is also important to mention that different short-term loans have different requirements for the borrowers, but if your business can tick off about two boxes, then you are good to go. You can typically access the quickquid alternative if you are at least six months in the business and have at least fifty thousand dollars in annual revenue.

Hopefully, you will have no qualms about going for short-term financing options after reading the points mentioned here. So, do your research and know all the options available for you before applying for the loan.