There is a lot of stigma attached to short term lending. And with good reason in some cases. But, the reality is that almost every business at some stage will need access to finance – and that’s not something to be ashamed of. Short term finance can help businesses react to changing situations or take advantage of new opportunities.
But what are short term business loans? Put simply, they allow businesses to fund a gap in cash flow. This gap could be one day, one week, one month or even a year depending on the circumstances, and it could be the difference between completing a job and getting paid or not completing the job and going under. Here is an example of why a business might consider short term funding.
A builder needs to pay his staff before a job is complete
A contractor is doing one month’s work of tiling for a building block. He will be paid 60 days after the job is completed but still needs to pay subcontractors and for the materials before the job is even started. This is the perfect scenario for short term finance. The contractor needs an amount upfront to complete the work to entitle him to get paid and make a profit. Without the funding, he couldn’t even start the job. The gap here is approximately 90 days.
While short term finance is typically more expensive than traditional finance, the real question is whether businesses can afford NOT to use it and miss out on an opportunity. In this instance, short term finance may be the answer, but as always there are pitfalls and traps to be aware of when looking for a lender.
Hidden Fees and charges
- Many lenders will advertise a low interest rate but will have a huge application fee, valuation fee, documentation fee or commitment fee attached to the loan which ends up making it very expensive.
- Strive Financial has no hidden fees and charges with no application fee and no commitment fee. If you are not successful in obtaining a loan you pay nothing.
Upfront fees
- Any good lender will not charge you a fee upfront. Be very wary of anyone asking for an upfront or establishment fee. There are unscrupulous companies that exist only to take upfront fees and then find a reason to decline the loan application.
- Strive Financial has no upfront fees or charges. If you are unsuccessful in obtaining a loan then you pay nothing.
Misleading time frames
- Many lenders will promise that they can fund within a short period of time but end up pushing back deadlines and blame the client when in fact they have never been able to do what they promised.
- At Strive Financial we pride ourselves on being able to settle loans quickly with little fuss. We aim to settle loans within 24 hours. Our fastest loan from application to funding was $75,000 in 45 minutes. We have also funded $600,000 interstate in 6 hours (from application to funding).
Early Termination fees
- Many lenders will have a minimum term. Where if you borrow the funds for 6 months then your minimum term is six months. If you pay back your loan in 2 months you are still liable for 6 months’ worth of interest.
- Strive Financial does not charge any early termination fees. If you borrow the funds for six months and pay them back in one week then you only pay for one week’s worth of interest. Interest is always calculated on the outstanding balance.
If your business is considering short term funding to bridge a gap in your cash flow, find out more about our short term loans. Or use our Loan Wizard to see what type of funding is best for your situation.