Finding the right business loan for your business is neither quick or easy. Although the case, there are many resources available to you to help find the right business loan. With the different types of business loans that are available you want to make sure to pick the one that is best for your business. Not just best in the short term, but also in the long term.
Applying for a short term business loan, or a Bridge Loan, will come with a variety of pros and cons. Understanding each of them is important and some times vital to the success of your business moving forward.
Below are some of the pros and cons in applying for a short-term business loan. Is a short-term business loan right for you?
Pros of Short-Term Business Loan
- Speed – The application process for a short-term loan is quick and easy. Your loan application can be processed in just a few hours. Once approved, your short-term loan can be closed and funded a few hours later.
- Documentation – Unlike a traditional bank process there are only a few items that are needed to approve a short-term loan. A simple loan application and 6 months of bank statements is all that’s needed to get you an approval.
- Quick Funding – When your short-term loan is approved you will only need to apply a few documents for funding. Typically, all you need is a copy of your driver’s license, a voided check, and proof of owners. Once provided and you sign your loan document, you are ready for funding!
Cons of Short-Term Business Loans
- Terms – Short-term loans have terms that range between 3 and 18 months. With the short duration of a loan you will have to repay your loan quickly. Make sure that your cash flow can support the loan payments and the money is being used for the right reason.
- Rates – The quick application process comes with its cons. With limited documentation comes the need for lenders to charge higher than normal rates. It’s important to understand your profit margins before accepting a short-term loan. Your return on investment is important!
- Payment Frequency – Bank and SBA Loans have monthly payments, while short-term loans have daily or weekly payments. Although this is not a big negative, it is something that many business owners are not used to. You have to make sure that you have strong daily bank balances to support the daily or weekly payments.
Do the Pros Outweigh The Cons?
Now is your chance to look at the pros and the cons of a short-term business loan and determine if it’s the right fit for you. The route of quick and easy is not always the best. The situation and use of funds is what should determine whether or not a short-term business loan is right for you.
Entering into a loan agreement is a big step for your business and it’s important that you make the right choice. If you are unsure or have more questions, you should speak with a Lending Advisor who will be more than happy to assist you. Contact us now at firstname.lastname@example.org or (888) 853-8922.