Businesses often realize that they need cash sooner rather than later. But they are clueless about where they get these short-term loans as the interest rate of the source, and repayment terms tend to vary. Choosing any random source for short-term loans possess a long-term impact on the company. This post is dedicated to all those business owners looking forward to having loans on a short-term basis compared to conventional loans. Let’s find out the options one can consider.
- Bank Overdraft
Several financial institutions offer overdraft features to business operating accounts. This suggests that the company can draw more from their cash account than they actually have. It gradually turns out into a line of credit, which they need to pay off within one year. It gets extremely beneficial in case any business needs a short-term loan for 30 days.
- Trade Credit
Trade credit is one of the most affordable places to avail interest-free capital. Whenever a business or company buys a product or service from any other company, the former gives time to repay it at no additional charges. The longer the time the vendor offers to repay the amount, the more cash can be retained in the company to invest in other enterprises.
Usually, terms happen for 0 days but make sure to ask for as much as possible long term (usually should be 45 days). If you need more time to pay the bill, make sure to ask for the same before the deadline.
- Charge and Credit Cards
In several instances, businesses leverage charge cards to satisfy specific transactions and then repay the balance right before the due date at no interest rate. This actually gives a short-term loan of less than 30 days. Some others also use credit cards to finance the business as the money is easily accessible.
But one needs to keep in mind that the rates can get expensive with topping 27% APR (Annual Percentage Rate). Though, many financial institutions offer introductory or something called balance transfer rates. The best thing is that they carry a lower interest rate that ranges for six months to a year.
- Online Loan Brokers
There are innumerable online companies that provide short-term loans to small businesses. They do so by connecting the lenders or offering finances themselves. It is important that these loans have to be applied similar to a bank loan as you need to show your credit score, overall sales, and profit share of the company. The interest rates can vary 10-24% APR.
- Refund Anticipation Loan (RAL)
RAL is a short-term loan that is usually secured by the taxpayer’s expected or anticipated tax refunds. RALs are mostly applied through a paid professional tax preparation service. According to the Internal Revenue Services, basing any fee on the refund is strictly prohibited, and thus the overall costs can vary.
Companies can also ask for crowdsourcing with a minimum APR. If you are also in need of short-term loans, you need to do extensive research to find the best and right source. Please share your insights with us below in the comment section.
