Those looking to start their own business may sometimes find that they need a little extra cash to cover startup costs and expenses, but don’t want to sell any of their assets or borrow the money from family members. Fortunately, there are many short-term loans you can turn to to make ends meet until your business takes off and begins making money on its own. Read on to learn about 4 great short-term loans every business owner should know about!
Short term loan
Short-term loans do not require monthly payments and are payable in full at the end of the agreed-upon time. These loans are typically utilized for short-term purposes like stocking up on inventory, raising funds for accounts payable, or completing modest projects with rapid returns, and are typically around $100,000. They are granted by banks and credit unions and are particularly handy for seasonal firms, such as merchants.
Long term loan
Large commercial lenders distribute one of the most popular forms of loans. They’re frequently utilized for corporate growth, acquisitions, refinancing, and working capital. Long-term loans that are returned every month are often greater in size and have lower interest rates than short-term loans. If you have a well-established firm or a fledgling company with a solid development strategy, they are usually easier to get.
The equipment loan
A small loan, usually under $20,000 that you use to purchase equipment. These loans are repaid over three to six years, just like a home loan. You can get an equipment loan from most banks or your local credit union. When applying for one of these loans, keep in mind that interest rates are much higher than personal and business loans as well as lines of credit.
The line of credit
A credit line or LOC refers to borrowing that is extended to you by a bank, sometimes also called a credit card. For example, if you have a $10,000 limit on your business credit card and spend only $5,000 during one month’s billing cycle, you still have access to those unused funds until your next statement. You can continue to charge against that outstanding balance without having to reapply for another credit line—as long as you don’t use up all of it. If you do spend more than what is available on your existing balance and don’t have additional cash on hand, it might be time to consider a short-term loan from one of these other sources.
The business credit card
Business credit cards are a form of short-term financing that gives you a line of credit to use as needed. Some business credit cards also offer rewards and benefits, such as cashback on purchases or travel reimbursements. You can use a business credit card in place of a personal card—it’s not just for individuals with bad or no credit. The most common business credit cards are issued by Visa, MasterCard, and American Express, but some banks also offer their own branded version with unique features.
Taking out a short-term loan can help a business bounce back from short-term financial setbacks, whether it’s paying for new equipment or giving employees a small bonus. Think of it as an easy way to take out some extra cash without going through all of the red tapes of applying for a long-term loan.