Short Term Loans

Short Term Loans

A short term loan is a type of loan that is obtained to support a temporary personal or business capital. As it is a type of credit, it involves repaying the principle amount with interest by a given due date, which is usually within a year from getting the loan.

A short term loan is a valuable option, especially for small businesses or start-ups that are not yet eligible for a credit line from a bank. Short term loans are suitable not only for businesses but also for individuals who find themselves with a temporary, sudden cash flow issue.

Short Term Loans
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Types of Short Term Loans

Merchant cash advances

This type of short term loan is actually a cash advance but one that still operates like a loan. The lender loans the amount needed by the borrower. The borrower makes the loan payments by allowing the lender to access the borrower’s credit facility.

Lines of credit

A line of credit is much like using a business credit card. A credit limit is set and the business is able to tap into the line of credit as needed. It makes monthly installment payments against whatever amount has been borrowed.

Payday loans

Payday loans are emergency short term loans that are relatively easy to obtain. Even high street lenders offer them. The drawback is that the entire loan amount, plus interest, must be paid in one lump sum when the borrower’s payday arrives.

Online or Installment loans

It is also relatively easy to get a short term loan where everything is done online – from application to approval. Within minutes from getting the loan approval, the money is wired to the borrower’s bank account.

Invoice financing

This type of loan is done by using a business’ accounts receivables – invoices that are, as yet, unpaid by customers. The lender loans the money and charges interest based on the number of weeks on invoices.

Benefits & Feature of Short Term Loans

Flexible end use

Short-term loans are multi-purpose loans. This means that they can be utilized for organising a wedding, taking a family vacation, renovating your home, paying for education, buying products or paying for a sudden medical emergency.

No Collateral needed

Short-Term Loans are generally unsecured. This means that you do not need to provide any collateral as security in exchange for the loan amount. This is very beneficial for customers who do not have any collateral to pledge as security.

Minimal documentation

The paperwork and documentation that is needed for a short-term loan is very minimal. This makes the entire process fast and easy for the customer as the documentation can be completed very conveniently with ease.

Quick disbursal

Short-term loan disbursals are relatively quicker than most of the other long-term loans as you do not need to provide documentation for the purpose of the loan amount and for any assets as none are pledged generally.

Advantages of Short Term Loans

Shorter Time

As short term loans need to be paid off within about a year, there are lower total interest payments. Compared to long term loans, the amount of interest paid is significantly less.

Quick Funding Time

It is considered less risky compared to long term loans because of a shorter maturity date. The borrower’s ability to repay a loan is less likely to change significantly over a short frame of time.

Easier to Acquire

Short term loans are the lifesavers of smaller businesses or individuals who suffer from less than stellar credit scores. It is generally easier to meet as relatively used for small amounts.