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
Misleading time frames
Early Termination fees
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.
UPDATED 7 JUNE 2021: with the EOFY fast approaching, now is the time for small businesses to make the most of the Instant Asset Write Off. Small businesses could realise immediate benefits in acting before June 30, but as always there’s plenty to consider so read on for more information.